Mortgage Payment Insurance

Mortgage payment insurance is offered by mortgage providers such as banks, credit unions and mortgage houses to help homeowners who may have trouble paying their house payment during a personal crisis period. A few providers of such plans, humorously called "choke and croak" coverage in financial circles often tout their ability to take the worry out of job loss, at least when circumstances dictate paying the home loan for six months. Of course each plan differs in actual length of coverage and in the coverage details within such a mortgage payment plan. Some plans may cover only unemployment, others may pay only for extended illnesses or disabilities, so costs vary from provider to provider. The benefits of mortgage payment insurance are clearly positive, but are the plans worth the money?

Mortgage payment insurance is usually based on three factors. The first is the amount of the home loan, the second is the age of the homeowner and the third is the use of tobacco. In most cases, the plans do not require a health checkup with a physician. Did you know that God actually invites Christians to put Him to the test to see if He will do as He says He will? "Bring ye all the tithes into the storehouse that there might be meat in mine house and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven and pour you out a blessing, that there shall not be room enough to receive it." (Malachi 3:10)

These kinds of plans are usually broken down into two distinct offerings. The first is often called credit life coverage which will pay off the entire home loan in the event of the homeowner's death. In this case, the surviving spouse can then only have the concern of lesser bills, often covered by the employment income of the survivor. The second type of mortgage payment insurance comes in the form of disability credit coverage which will pay for the home loan payments in the event of a crippling accident that prevents return to one's former line of work. Now both types of coverage appear to be a good thing to have, just like an extended warranty on a car or a three year extra warranty on a television may actually sound reasonable. But every financial expert says to stay away from those warranties because they are a waste of money and so is, frankly, any form of home loan payment coverage because they are very expensive models of what can be purchased more cheaply from life insurance companies and those who dispense disability coverage.

Term life coverage in today's market is cheaper than ever before and if a person is in reasonably good health and below the age of fifty, term life insurance to cover the cost of one's home loan will be a lot less than what the bank wants to sell the loan holder. The bank is not the extender of the life insurance, only the middleman, so included in the price of its mortgage payment insurance is profit for the bank or the loan provider. Ostensibly one might think that the cost of that coverage would be a good deal, but the provider is only offering one company's services for the life coverage, so what kind of a deal is that? Many online services allow the customer to have term life companies bid for a customer's business, substantially reducing the final cost. It is important to remember that term life coverage and not whole life or even a hybrid of the two is being discussed. Whole life, which builds equity over time, is much more expensive than term coverage that has no equity.

The second form of mortgage payment insurance that falls under this general umbrella is home loan disability insurance. This too comes in very expensive packaging when offered by the bank or lending entity. This has been called by financial experts some of the most expensive coverage anyone can buy. Many companies offer long-term disability coverage and the amenities are often better than buying this specialized disability plan. Make no mistake, disability coverage is expensive, no matter who is offering it, but the home loan provider's version is going to be much more costly. Mortgage payment insurance in the form of the bank's offering will probably be crafted to make a full payment on the home loan each month. It will be extremely important to read the fine print on the contract because there may actually be a time limit on the payment schedule. It may only be for a period of months and not indefinitely. Long term disability coverage sold by many companies may offer much longer payment schedules but will pay between fifty and seventy percent of a person's working salary.

The advice is to look elsewhere for term life and disability coverage than that which will be offered by one's mortgage provider. Understand that on the day of closing a homeowner can be highly pressured to buy these preformed mortgage payment insurance packages. If a person has done due diligence ahead of time and has acceptable coverage already in hand, the customer will find it easy to say, "No thanks, I already have that covered." The only thing that will then be lost that day is a hefty bit of cash from the pocket of the bank or loan broker. And that is a good thing for the buyer.