Mortgage Protection Insurance and Non Medical Life Insurance, Is there a difference?

Regardless of how careful you try to be, life is full of the unexpected. That is why mortgage protection and life insurance is all about the certainty of planning for the uncertain. It’s not uncommon for life insurance to also be referred to as mortgage protection insurance, since most people equate buying life insurance with the need to pay off large debts. Both forms of insurance are created for the protection of your family and/or dependents and both provide peace of mind for you, knowing that their lifestyle can continue without additional difficulties. While the coverage is similar, there are some differences in the design of these life Insurance programs as well as how they should be used.

Mortgage Protection is a specialty type of life insurance usually offered to consumers who have recently purchased or refinanced a home mortgage, generally within the last 12-18 months.  Various life events will typically create the necessity for this type of product and since a home is one of the largest investments most families will ever make, carriers have created forms of life insurance designed to cover those needs most relevant to homeownership.  Please, do not confuse this with primary mortgage insurance (PMI) which is placed by a lender to protect them in the event that you default on your loan.  This mortgage protection is much different and is for the benefit of you and your loved ones.

Mortgage Protection is a simplified issue life insurance policy in which insurance carriers offer an expedited underwriting process that does not require a medical exam and is considered non medical life insurance. The death benefits are payable up to 125% of the mortgage balance or a maximum of $250,000. Typically, all that is required is a few medical history questions and, in some instances, a blood and vitals check in your own home by a registered nurse. Mortgage Protection is an easy and affordable solution for young, healthy families and those who have minor health issues that are managed by oral medication.  Even casual tobacco users can benefit from such an option since under most circumstances they could be charged more for fully underwritten products.

Interestingly, these policies can offer many additional rider options, some of which are specific to the mortgage.  One such option is a Mortgage Payment Rider which will pay all or part of your mortgage payment for up to 24 months after a 90 day waiting period if you are injured or seriously ill and unable to pay. The most popular rider is the Return of Premium Rider which is a living benefit that repays you the entire total of premium you have paid over the term of the policy. Considering that most term policies run 15, 20, or 30 years like the mortgage, a return of $30,000 is not uncommon and is also an effective tool for paying off or down on the mortgage principal balance or to purchase an insurance product by paying in full.

Straight Term Life Insurance is the least expensive type of coverage and provides protection for those value minded consumers for periods of 10-30 years. Straight Term Life can provide the most coverage with a guaranteed premium for the length of the term. While these polices can be more affordable for very healthy consumers, more in depth medical underwriting will be required for polices over $250,000. Also, individuals will fall into specific premium risk classes based on age and health status, which may be beneficial for older healthy individuals and those who need higher amounts of coverage.

As you can see there is a wide range of options available to you. These days you can run instant online quotes directly from the internet. However, what type of policy is right for you depend on many factors, and your insurance advisor can assist you in determining which policies are most beneficial for your situation