To buy mortgage protection, you need the willingness to give up something today so your family won’t have to give up everything tomorrow.
Typically, when most bread winners consider purchasing mortgage insurance their thoughts are centered on the impact on surviving family members if they were to die prematurely. The primary purpose of mortgage insurance then should be to pay off the home loan if a bread winner dies before the mortgage is paid off. With the loss of income at death, this protection can mean the difference of whether or not the family can (at least) stay in the family home. Mortgage protection can be purchased directly from most lenders or it can be purchased through a life insurance professional who specializes in this type protection. Mortgage insurance is like life insurance in that there is a death benefit paid. With mortgage insurance, the coverage amount or face amount is typically equal to the balance owed on the home loan.
Mortgage Insurance should be purchased directly through an experienced life insurance agent. This is the only way for you the consumer to keep control. If it is purchased through the lender/bank then the beneficiary is that lender/bank…not your spouse, for example. Lenders/banks do this to protect themselves. Another reason to purchase mortgage insurance through a life insurance professional is that this protection is tied directly to your life and not the lender. This is important because if your loan is sold to another lender you don’t loose the protection. Many mortgage loans are sold and resold multiple times during the course of 30 years. Also, if your mortgage protection is tied to your existing loan number/lender and you decide to refinance your mortgage the mortgage protection can be lost forever. When mortgage protection is purchased through a licensed and experienced agent the result is complete control. The beneficiary can be a spouse or the family trust. Being informed of these differences is critical.
For further reading about Mortgage Protection Insurance, please read this article