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How Do I Choose the Best Mortgage Protection Plan?

Article Details
  • Written By: A. Rohlandt
  • Edited By: Susan Barwick
  • Last Modified Date: 16 April 2019
  • Copyright Protected:
    2003-2019
    Conjecture Corporation
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When choosing a mortgage protection plan, you should consider the monthly payments and the kind of coverage offered. Another important consideration would be whether to choose reducing term or level term coverage. Consult different brokers to compare rates and the types of mortgage protection available.

The most important consideration when choosing a mortgage protection plan are the costs involved and the monthly payments. In most cases, the monthly payment is determined by the type of protection plan you choose and the level of protection offered. Choosing a plan you can afford helps ensure that you will be able to keep up the payments long term, which means that you will always be protected.

Another consideration is the type of coverage you need. A standard mortgage protection plan only offers protection in the event of your death, but the best plan offers coverage in the event of disability or unemployment as well. This is usually more expensive but offers greater protection. In the US, statistics show that more people lose their homes due to unemployment than through death or illness, so the extra coverage might be the protection you are most likely to need.

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The choice between reducing term or level term coverage can be important as well. Reducing term coverage only covers the amount outstanding on your mortgage, so if you have paid off half of your mortgage, only the half left outstanding is covered. With level term coverage you are always covered for the full amount of your mortgage, whether you've paid off only a small portion or most of it. If you have paid off most of your mortgage, and you have level term coverage, a lump sum will usually be paid out to make up the difference. This cash payout can be very helpful in a situation in which household income has been affected.

It is best to consult different brokers when choosing a mortgage protection plan, as there are many packages and options to choose from. Many people believe that they are obliged to get their mortgage protection from their mortgage lender, but this is not the case. By comparing prices and the coverage offered, you should be able to get coverage that suits your circumstances, at the best rates possible.

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