Mortgage protection is a type of insurance which covers mortgage payments or pays off the entire mortgage when the home owner becomes physically unable to continue making payments. Different types of mortgage protection insurance cover unemployment, disabilities, illnesses, injuries, and/or death. Read on to learn more about what mortgage protection is, how it works, and how much it costs…

This type of insurance typically repays the entire mortgage if the beneficiary passes away. When other forms of protection are offered (medical, unemployment, etc), it usually makes the monthly payments until a certain number of years have elapsed or the borrower becomes able to start making payments again. Mortgage protection should not be confused with Private Mortgage Insurance (PMI), a different type of coverage which compensates the lender if the borrower stops making payments for financial or other reasons, but does not provide any direct benefit to the home owner.

As with other types of insurance, the beneficiary will have to obtain quotes, apply, gain acceptance, and pay monthly premiums. The premium rates depend upon the loan balance, beneficiary’s age, current health-related factors, the level of coverage for additional family members, and other conditions. MortgageProtection.com lists some sample premiums on their web site (based upon $250000 worth of coverage), such as $11.38 dollars per month for a thirty-five year old male, or $112.44/month for a sixty-five year old. Some insurers offer online quotes in exchange for completing a short form.

Although mortgage protection premiums are higher for people at an old age, the benefit decreases as time passes, because the beneficiary has paid off more of his or her loan. Some insurers offer a “Return of Premium” benefit; this means that the company will refund the beneficiary with all of his or her premiums if they are still alive at the end of the insurance term. This is sort of like putting the money in a bank and receiving insurance coverage instead of interest. However, the effect of inflation upon these premiums should not be overlooked, especially when the term lasts 2-3 decades.

Overall, mortgage protection coverage is worth considering for people who still have a significant amount of principal to pay off, along with monthly payments which are high enough that they would be burdensome for a spouse to continue paying. It can be quite affordable for some people or too expensive for others, depending upon various factors.