There are many different kinds of insurance and mortgage protection is just one. However it is an important one since buying your home is a major financial undertaking.
Mortgage protection is a form of insurance that you may take out when you get a mortgage, just in case you are unable to pay the monthly instalments due to job loss for some reason. In most cases when you default on mortgage repayments the lender will take your home and sell it to get their money back.
But when you have mortgage protection this will not happen because it is insurance specifically designed to pay off the mortgage for you. This means that if you should be unable to meet the payments your spouse and children will not lose their home. Naturally, this is the biggest benefit, however knowing you have it will give both of you great peace of mind, so that is another benefit.
The cons of having mortgage protection are that you have to pay for it, but this is no different from any other insurance. If you want protection you have to pay for it; it’s that simple. Such a payment should not be seen as a waste of money when you consider the great benefits. It will also pay off the mortgage if you should die and so your children and spouse are protected.
Another con of mortgage protection is that the payments may only last for say, 3 months. So if your employment or health problems last longer than this you will not be covered. However, all mortgage protection policies differ, so you need to read the product disclosure statement carefully to find out what it entails before you decide that it is the right one for your needs.
Mortgage insurance should not be confused with lenders mortgage insurance. This is to protect the lender should the buyer default in his payments; it does nothing to protect the buyer. Lender’s mortgage insurance is often required if you do not have a big enough deposit for your home loan.