Finance and LawLifestyle

The Importance of Mortgage Protection Insurance

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When applying for a mortgage, getting mortgage protection insurance seems like a logical solution because it will guarantee your large mortgage repayment at the time of your death. This life insurance is not compulsory, but it is strongly recommended for people applying for a large mortgage to use the coverage related to this insurance. It will be tough to know that your family will be able to live in a home without a mortgage when you are not alive.

On the other hand, when people take out a large mortgage to buy or build a house or meet their living needs, the borrower and the lender are usually worried about what will happen if they die and what the survivors will do, so life insurance to solve problems. And such are the concerns if the insured (borrower) dies during the life insurance term (mortgage). Life insurance companies pay the rest of their mortgage installments from the date of death or critical illness until the end of the mortgage period together in the bank or lending institution (insurer). In this way, credit institutions or banks will repay the mortgages given to the applicant. 

In life insurance, the borrower can prepare this insurance policy by paying the client insurance premium, and if the insured dies during the mortgage repayment period, the rest of his mortgage installments from the date of death or critical illness until the end of the mortgage period will cover. The insurance company will pay the bank or lending institution, and the families of these people will not face the problem of repaying the remaining installments.

Who Is Mortgage Protection Insurance Suitable For?

Mortgage protection insurance is generally suitable for all people who use banking facilities and institutions. Also, one of the concerns and worries of lending institutions and banks, borrowers, and the heirs of the borrower, is the repayment of mortgage installments in sudden death or critical illness. With the borrower’s death, the remaining installments of the mortgage become current debt, and the survivors have to settle it. On the other hand, banks and institutions have to identify the estate and inheritance of the deceased and incur costs.

Features of Mortgage Protection Insurance

Life insurance is designed and offered to resolve the concerns of both parties and with relatively easy conditions. In this case, the insurance company immediately settles the remaining installments of the large mortgage and provides comfort and peace of mind for the deceased survivors.

  • A type of life insurance with a limited time and no financial savings.
  • A commitment of insurance companies to pay the remaining mortgage in case of death or critical illness of the insured or complete disability.
  • Ensuring lending institutions receive mortgage installments to applicants in the event of their death or critical illness.
  • Creating a sense of peace about not transferring the borrower’s debts to his family after the death or critical illness.

Coverage of Mortgage Protection Insurance 

The primary coverage of this insurance policy is death or critical illness cover. If a permanent and complete disability or an accident occurs, the applicant will be exempt from paying the premium. Policyholders include all borrowers and actual users of the bank credits or employees of companies or banks and financial institutions.

During the insurance policy term, the insurance company will be responsible for paying the insured’s debt balance from the time of death or critical illness until the end of the contract according to the banking rules and regulations.

Benefits of Mortgage Protection Insurance 

This insurance is suitable for people who have taken out a mortgage and are paying the installments. The life insurance is conditional on death; if the insurer dies before the end of its installments, the insurance is responsible for paying the remaining installments. In death, the applicant’s collateral is preserved, and no pressure is put on his family. But in general, the benefits of this policy are:

1. Facilitate the payment of mortgages by banks and financial institutions

This policy will assure the lending bank or institution about the repayment of the mortgage installments, and they no longer need to try various ways to repay the remaining mortgage installments. Both the lender and the borrower will benefit from the benefits of this insurance policy.

2. Provide peace and comfort

In this insurance policy, the borrower’s debts are not transferred to his family after the applicant’s death, but the risk of the borrower’s obligations is transferred to the insurance company, which will bring a sense of peace and security for the insurance company applicant.

3. Relieve the borrower of worries about his sudden death and their debts 

This insurance provides peace of mind for the survivors of the deceased, and they do not have to worry about paying installments.

Limitations of Mortgage Protection Insurance

Because this insurance must pay for the death of applicants, the age and health status of the insurer are vital to the insurer and is influential in determining the premium rate and whether or not to issue this policy. In most insurance companies, the total repayment period of the installments plus the insurer’s age must be less than 70 years and do not provide services to people over 70 years. Also, some tests may be necessary for older people before deciding whether or not to issue this insurance.

Mortgage Protection Insurance Premium and Payment Terms 

This insurance premium is calculated by multiplying the remaining installments by a factor of one and determining the premium. This coefficient may vary in different insurance companies depending on the age and circumstances of the applicant. The payment method can also be other in various companies. Some companies receive the total premium for all installments at once. Some insurance companies also offer the insurer the possibility of paying an annual premium. In general, how you pay the premium depends on the company from which you receive the services of this insurance. Payment of mortgage protection premium is often lump sum or annually.

How to Get Compensation in Mortgage Protection Insurance

Receiving damages in this insurance means paying other installments by the insurance company after the applicant’s death or critical illness. Usually, the banks themselves do this. In this case, after the applicant’s death, his accounts will be closed, and the bank will inform the insurance if the applicant has mortgage protection insurance so that the insurer can pay the remaining installments. However, in the borrower’s death, his family is obliged to notify the insurance company in writing as soon as it is informed and subsequently send the required documents to the insurer.

SWG Mortgages experienced advisors, taking into account the terms and characteristics of your mortgage, help you find the most suitable life insurance options. Considering the premiums of reputable insurance companies, they will provide your life insurance policies with death or illness cover against your mortgage unpaid installments.

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