Mortgage protection insurance. Who needs it? Probably you.
Understanding what mortgage protection insurance is and what it is not can help you decide if you need this type of life insurance policy. If you die, would you want the balance of the mortgage to be paid off, leaving your family with a free and clear house? If so, then a mortgage protection plan is what you need.
In this article, we will go over mortgage protection cost, which companies are best and how to get quotes for this type of plan.
Plus we include a few tips and tricks on how you can pay off your mortgage 7-8 years early.
What is mortgage protection insurance?
Mortgage protection insurance is nothing more than a term life insurance policy used to pay a death benefit to a beneficiary. The beneficiary has the option to use the money as they choose. Some beneficiaries may elect to pay off the mortgage, and some may not. Regardless, mortgage protection life insurance leaves your loved ones with options
Mortgage protection life insurance can be more than just life insurance. You can add riders to this type of policy to help pay your mortgage payment in part if you lose your job or become disabled or chronically ill. And if you die, the balance of the mortgage will be paid, leaving your family with a free and clear house.
What mortgage protection insurance isn’t.
- PMI (private mortgage insurance)
- Protection from unemployment
- Protection from a disability
- Protection from chronic illness
- Protection from critical illness
Best mortgage protection life insurance companies
The market for mortgage protection is crowded. Multiple companies offer their own version of the product. Some, unfortunately, are overpriced, and others have very thin policies which don’t provide many features.
We represent over 30 of the best life companies. Because we specialize in life products, we have been able to sift through the options and understand exactly what is being offered and at what price. Beware of solicitations that don’t provide options. If the agent you are working with only represents one company, the offer is probably better for the agent than it is for you.
The most significant factor when choosing the best mortgage protection company is determining which company will offer you the best rate class. If you do not know what a rate class is you should. You can learn what a rate class is on this page.
The best mortgage protection life insurance companies are:
- Sagicor (no exam up to $1,000,000)
- SBLI (no exam up to $500,000
- Pacific Life
- Lincoln National
The worst mortgage protection life insurance companies are:
- State Farm
- Mutual of Omaha
State Farm, USAA, Americo or Mutual of Omaha, —–Even though these companies say they have a particular mortgage protection series product, they are all still just term policies, and they are expensive term policies compared to the competition.
How much does mortgage protection insurance cost
Like most life insurance policies, multiple factors go into pricing the policy. The primary factors are your age, gender, state, health, product type and coverage amount.
Most people apply for enough coverage to cover their mortgage balance. So then if you have a large mortgage you will need more coverage which will lead to a higher cost.
Every company can price differently for each risk factor. Some companies are better suited to tobacco users. Others excel with customers who struggle with their health. If you are young with perfect health, we can find the best carriers for your niche as well.
Learn more: All the factors that make up the cost of life insurance
You don’t have to guess what the cost will be. We built a quote engine to instantly compare rates from the top companies in the county. It’s the simplest quote form you will ever use and it provides instant rates after you enter some basic information. You can run a full quote in the widget on the sidebar of this page.
How to pay off your mortgage early with life insurance
Paying off your mortgage if you die sounds like a great option for your loved ones, but what if the same policy could pay off your mortgage 7 to 8 years early if you live a long healthy life?
Mortgage protection insurance can help you pay off your mortgage early if you buy the right plan. Let’s take a look at one type of life insurance that can pay your mortgage off early if you live.
Type of plan – How it works
There are several types of policies you can use for these strategies, a term with a return of premium can work, but an index universal life policy is your best option. An Index Universal Life policy will provide a death benefit and build cash value. The cash value will grow by tracking an index such as the S&P 500. IUL policies get all the upside and possibility of double-digit market returns (up to a cap) with none of the downside of negative market years.
For the case study, I used a 30-year mortgage at a 3.5% rate. A $500,000 mortgage with 20% down payment. You can run amortization schedule here
Life Insurance Policy Details
An IUL for a 40-year-old non smoking male with a $400,000 death benefit. Preferred Plus rate class used.
Cash withdrawal options
As you can see the cash value in the policy in year 22 of this plan will be more than the remaining balance on the mortgage. You now have two options with the life insurance policy. You can surrender the policy and take all the cash to pay off the remaining mortgage which will end the policy. Or you can make a withdrawal/loan on the cash value (after all this is your money) and this will keep the policy force and the death benefit alive.
Interested in this plan?
We can design a plan specific to your mortgage. You have to mention this article when you call. Contact us here for an illustration.
Adding a disability insurance rider makes sense
The best life policies can be modified and improved upon. An additional benefit that you add on to a life policy is called a rider. One rider you should consider, if you buy mortgage protection insurance is the disability rider. If you become disabled, the life policy will pay a monthly benefit which can total the amount of your mortgage payment or more depending on the amount of the rider.
Most disability riders come with short-term and long-term options based on your disability. If you become disabled, the policy provides cash which can help make mortgage payments.
The cost of the rider can vary by the mortgage protection insurance company you pick. Make sure you are looking at multiple companies and their options before you make a decision. Also, qualifying for a disability rider is tough; you must be in good health to do so.
It’s important when thinking about any life insurance product, whether it is mortgage protection, term life, or permanent life to compare multiple options.
If your insurance agent only represents one or two companies, you are probably not getting the best value or best coverage options.
The problem is time. It takes time to contact multiple agencies for a wide range of quotes and options. You are forced to provide the same information again and again.
We can do this for you. When you quote your life with us, we are reviewing 30+ companies to find you the most affordable value. And we are experts, and we understand the underwriting guidelines and products for each company so that we can create a product tailored directly to you.
Fill out our quote form today or ask an agent to contact you for more information.
Another policy that offers mortgage protection will payout in two ways. If death, permanent disability, or critical illness is the reason for the inability to make your mortgage payments, the payout will be in one lump sum for the amount of the remaining mortgage. If the reason is temporary disability or temporary unemployment, the payout is the making of monthly payments that begin after a waiting period and continue for a specified period of time or until you are able again to get back to work.
policy that offers mortgage protection will payout in two ways. If death, permanent disability, or critical illness is the reason for the inability to make your mortgage payments, the payout will be in one lump sum for the amount of the remaining mortgage. If the reason is temporary disability or temporary unemployment, the payout is the making of monthly payments that begin after a waiting period and continue for a specified period of time or until you are able again to get back to work.
interested in a policy that offers mortgage protection will payout in two ways. If death, permanent disability, or critical illness is the reason for the inability to make your mortgage payments, the payout will be in one lump sum for the amount of the remaining mortgage. If the reason is temporary disability or temporary unemployment, the payout is the making of monthly payments that begin after a waiting period and continue for a specified period of time or until you are able again to get back to work.