How to Compare Quotes for Mortgage Protection Insurance
Many home buyers take the option of mortgage insurance when purchasing a new home. A mortgage protection insurance policy covers your monthly payments in the event that you suffer a financial blow--such as losing your job, unexpected medical costs, or death of the bread winner. Buyers with good credit and decent employment history are offered the best rates for mortgage insurance, though such people are the least likely to ever use it.
If you are considering taking out a policy on your mortgage, here are some tips to evaluate insurance quotes so that you get a good deal.
First, read the terms and fine print on your other insurance policies, such as your life insurance or unemployment insurance. You may already have coverage for mortgage protection. In this case, buying an additional policy is unnecessary.
If a mortgage protection policy covers unemployment, it usually covers 12 months of payments in the event that you lose your job. It is difficult to obtain coverage for unemployment, so if you are eligible, it is because you are in a low-risk category.
If you have enough savings to cover a year's worth of mortgage payments after a job loss, you may not need such a policy. However, if you don't have a lot of savings, or you plan to change jobs, then this can be a good investment.
Some mortgage insurance policies only cover death of the home owner. To be eligible for such insurance, you may have to take a physical exam or be a non-smoker. You must also be under a certain age. Those in high-risk professions, such as law enforcement, may not be eligible.
To evaluate different mortgage protection insurance quotes, you need to compute a few numbers:
(1) Figure your yearly mortgage payments, as well as the principal balance still owed. Each year you will owe less principal than in the previous year. You can find this information on your mortgage bills.
(2) For each insurance quote, compute the total amount you will pay for each year. For example, if a policy is $250 a month, then a year will be $3000.
Compare the numbers you calculated above. If you feel that the mortgage insurance premiums are a good value, according to your risk of death/unemployment, then you should take out a policy.
However, if the premiums are too high and you are not in a high-risk category, don't feel pressured to buy the insurance. In the US, only 2%-3% of home owners have such policies.
One alternative to mortgage payment protection insurance is good life insurance. Comprehensive life insurance covers many expenses including mortgage payments.
© Had2Know 2010