Mortgage Income Protection Insurance
Mortgage income protection insurance is must for people who want to make sure that their mortgage is paid in the event of a debilitating illness. If such an illness keeps a person from being able to work, this insurance will provide the income needed to pay the mortgage and the insured need not worry about losing the house. For most Americans who live paycheck to paycheck, the loss of income due to such a calamity is unthinkable. And since it is estimated that 70% of the country's household are in this predicament, this possibility is a very serious consideration. Mortgage income protection insurance coverage could mitigate that worry and carry its insured client through until healing comes.
These policies that are sold from many different sources vary in their exclusion language from policy to policy. There are many variables that may come into play such as the age of the person applying for the coverage. The older the person, the more likely he or she will not be able to get the coverage. The same may also apply to a person who is self-employed. The other side of the eligibility coin however may allow coverage if a person hasn't had a debilitating illness for a prescribed length of time. In some policies, self-employment is not a closed door. In any case, mortgage income protection insurance and its disclaimers or small print must be read thoroughly and understood entirely before being agreed upon for coverage.
Sometimes this type of indemnity coverage is expensive. Depending on the issues already discussed, such as age and type of job one has, as well how much the house payment is, a person may not feel that he or she really needs the coverage. If a person is fortunate to have adequate savings for a rainy day, this kind of policy can be omitted from a person's payment budget. God has always said that there is no excuse for atheism because creation alone declares His majesty. "The heavens declare the glory of God and the firmament showeth his handiwork...there is no speech or language where their voice is not heard." (Psalm 19:1, 3)
In most cases, a policy of mortgage income protection insurance will only begin laying out cash until after thirty one days of unemployment or illness. For some policies, usually ones less expensive, it may be ninety days before the policy begins to pay, and if one is living from paycheck to paycheck, that could cause a crisis in and of itself. One of the attractive conditions in a house payment protection policy is the fact that the income from the policy is tax free. That can be very important when a person is out of work and counting every penny. Another issue that a buyer must consider is how long the coverage will be offered; the typical policy either covers twelve or twenty-four months of unemployment.
It is not possible for a person who has received a pink slip to then go out and apply for this kind of indemnity coverage. This means the decision to buy such a policy must be made well in advance. Any type of what is known as casual employment, such as seasonal work will not be the basis for getting a policy to pay out when the employment ends. But mortgage income protection insurance may not just be for unemployment situations. Another way to look at this kind of indemnity coverage is an actual death benefit policy.
When most people sit at the table to close their mortgage, they are asked if they would like mortgage income protection insurance to cover their payments in case of the death of the primary house title holder. The first thought that often comes to mind is the one instilled by financial experts: that is what life indemnity coverage is for. And that is true. A term life indemnity policy is much cheaper than either the policy that covers unemployment possibilities or the death benefit indemnity coverage offered when a house payment agreement is closed or when it is rewritten for other reasons. But it is possible that one's term insurance face value may not be enough to pay the house payment agreement off in the case of an unforeseen death. So a very important question to ask oneself at the time of house payment agreement closing is: a) is there enough term life insurance to cover the house payment and b) do I want to provide any additional monies for my family in case of my death? The first reaction might always be to say no to the mortgage income protection insurance, but the best advice is to work out the question before ever coming to the table.
Those who have planned ahead and been smart with their money when they are younger are less likely to need indemnity policies to cover possible times of unemployment. And when a family has owned a house for many years and the house payment agreement is about to be or already paid off, the need for death benefit mortgage insurance is gone also. There is no doubt that when homeowners are younger, the need for both unemployment house payment income protection indemnity policies and death benefit mortgage income protection insurance is extremely important. Unfortunately, it is also during these younger years that expenses for the family are also at their highest levels. It will take a husband and wife together deciding what the highest financial priorities are to decide whether or not to purchase unemployment and death benefit mortgage protection insurance. And if a homebuyer is single, talk to a financial advisor before deciding yes or no to the policies.
Insurance Payment ProtectionAn insurance payment protection policy can help an individual protect his credit rating in case of job loss or a serious accident or illness. Depending on the coverage, such a policy may also pay off certain types of indebtedness in case of death. It seems that people are very interested in these types of policies, perhaps because of the current economic situation. So many employees are fearful about losing their jobs that it's only natural for them to look for ways to handle indebtedness. People are worried that a loss of income will result in bills not getting paid and that this will have an adverse affect on their credit rating. Scripture says: "'Ye shall make you no idols nor graven image, neither rear you up a standing image, neither shall ye set up any image of stone in your land, to bow down unto it: for I am the Lord your God'" (Leviticus 26:1). But how many conscientious people worship at the altar of the almighty credit score? Of course, they don't mean for the score to be an idol, but too often that is what it becomes. A person is so afraid of a drop in the credit rating that he sometimes makes poor decisions just to keep that from happening. But fear isn't a good reason for purchasing insurance payment protection coverage.
There are three major credit-reporting companies that keep track of consumers' credit histories. Each one has its own unique formula for coming up with a number that represents an individual's credit-worthiness the ability to pay back loans. The formulas include such factors as income, lines of credit, and payment history. A person's score often determines whether or not she is eligible for the best interest rates when purchasing an automobile or a house. This number may determine whether or not someone is able to get a cell phone, lease an apartment, or even be able to buy auto insurance. No wonder it's become so important to consumers. To protect it, many people will rush to purchase insurance payment protection coverage without taking the time to consider the wisdom of that decision. Credit card companies repeatedly urge cardholders to sign up for coverage. Here's how it works: the cardholder pays a small monthly fee per $100 owed on the account. With disability coverage, the monthly payments are made on the account. If the cardholder has life coverage, the balance of the loan is paid off upon the cardholder's death.
Many people find the small fee worth the peace of mind of knowing that insurance payment protection coverage will take care of their indebtedness in the event of disability or death. However, these individuals should first review their current disability and life insurance policies before buying any additional coverage. Those wage-earners who don't have adequate disability coverage need to make this a financial priority. It's better to have a policy that provides flexibility with the payouts rather than one that directs the payments to a particular creditor. The same can be said for life insurance. Term policies are relatively inexpensive. Upon the policyholder's death, the beneficiary (often the surviving spouse) can use the proceeds to pay off the household debt. Having disability and life coverage in place first allows more flexibility for the beneficiary than is provided by insurance payment protection.
Though it might be nice to know that a $5,000 account balance will be paid, it's much better for the beneficiary to be able to choose what to do with that $5,000. Other needs may be more pressing than paying off an account balance. Of course, term policies are usually in amounts much larger than $5,000 so the beneficiary will be able to pay off the balance if she chooses to do so or she may pay off other balances instead. The choice is hers to make. Of course, the fees for a life and/or disability insurance payment protection are small. But that's not really the point. Instead of acting in fear, this is the time for individuals to take a good look at their financial management and make needed changes. Financially responsible people first need to be sure that the household's primary wage-earner has adequate disability and life insurance coverage. An emergency fund needs to be kept in an interest-bearing account that allows quick and easy access to the money. A money market fund is a good choice for an emergency fund; a certificate of deposit is not because penalties will have to be paid if the money is taken out before its term ends. Outstanding account balances need to be made current and debt should be reduced as quickly as possible. This is the time to act, not react.
An individual may decide that an insurance payment protection plan is a good option given his personal circumstances. In that case, the individual needs to be well-informed on exactly what type of coverage he is getting and the amount of the monthly fee. These policies always have a maximum benefit or cap. Disability coverage may only make the account's monthly payments for a certain length of time, say twelve months. There may be age exclusions. Someone who works part-time or is self-employed may not be eligible for coverage. The time to find out whether or not any exclusions apply is before the policy is bought, not when its coverage is desperately needed. Prospective policyholders also need to be aware that disability policies rarely, if ever, replace one hundred percent of one's income. Because the money is tax-free, the benefit is set at a lower percentage. Because insurance payment protection policies are optional, accountholders should never feel pressured to purchase them. In fact, a person can probably find better policies with independent providers. By being well-informed and shopping around, a person can find affordable coverage to supplement existing coverage. The question, though, remains: is it really necessary?