Mortgage Insurance is a “concept” that is designed to pay off the mortgage upon one’s death and to pay off the mortgage should one become disabled; but since it’s a concept we can add things to the policy to make it “more dynamic” for more functionality.
When you get your home you get PMI Insurance mandated into your mortgage payment. PMI is mortgage insurance but its paid for by the mortgage holder to protect the lender. This means if something happened to you, the benefit would be paid to the mortgage lender at the current amount owed. Essentially PMI is decreasing term insurance so as the years go on the benefit drops because the bank can’t make a gain on the loan except what was in the mortgage contract. PMI also cancels automatically after one accumulates 20% equity in the house as that becomes the security for the loan.
As someone buys a home, they often establish a will, because your home creates an estate. An estate is a combination of one’s home, possessions, and investments that upon one’s death will need to be given to surviving people that the deceased individual wanted to have things. When someone inherits the home, they are the rightful owners by gift, but that doesn’t mean it’s free and clear. That individual named as the heir to that home must continue to make the mortgage payments in order to keep the house unless it’s paid off free and clear. This could happen if they also get a large settlement from one’s insurance policy or investments but that is a big IF.
That is where Mortgage Insurance comes in. We can cover the home for the term of loan (up to 30 years) for the value you purchased it for. The beneficiary of the policy would be a family member or friend, should you pass away for them to pay off the mortgage and live in the home. Should you pass away and they don’t want the home they can take the mortgage insurance benefits and keep them, sell the home and make a lot of money. The benefit doesn’t decrease over time so as you pay off your home there is more money free’d up to have for the beneficiary. We can add a rider that allows the premium to be paid up upon your disability and you can cash out that plan to pay the mortgage off. The concept is endless.
