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A Beginner's Guide to Mortgage Insurance

Mortgage insurance is highly recommended for individuals who own homes simply because a sudden drop in income can sabotage your ability to pay your bills. Although some assistance is available from the United States government to help you pay your mortgage if you lose your job, you have to wait nine months before you can apply. Buying mortgage insurance might be the only way to ensure that your home will not be taken away.

Before investing in a mortgage insurance policy you need to decide how long of a term you would need to apply for if you lost your job. Most companies offer coverage for successive annual periods such as one year, two, three years and so on. If you are satisfied that you would be able to find a job within one year of losing your current one, then only buy a one year term. These terms are called the Benefit Periods. Keep in mind that the longer the Benefit Period, the more expensive your premiums.

Most mortgage insurance policies also have some "hitches" in the fine print as well. You need to read the policy carefully when it comes to an explanation of both the Initial Exclusion Period as well as something called an Excess Period.

The Initial Exclusion period prevents you from collecting unemployment insurance immediately after submitting your policy. Depending on the company, the Initial Exclusion period can be thirty to sixty days or even longer. Don't plan on losing your job until you are sure this Initial Exclusion period has passed or you won't receive any benefits!

Also watch out for the Excess Period. Every time you make a claim for mortgage insurance benefits your policy might exclude anywhere from thirty to sixty days from your claim. For instance if you claim for seventy days of unemployment, but your Excess Period is sixty days, then you will receive a payment for ten days as opposed to seventy.

Some unemployment insurance companies will also hold your payments for a set number of days such as thirty days, sixty or more. Examine your contract carefully to see how many weeks you will have to survive on your own resources before you receive the first mortgage insurance check.

Also according to some policies, you may not be eligible to make a claim until you have been unemployed for a minimum period. For instance, you may not be able to file for benefits if you have only been unemployed for fifteen days, but your policy states that you must be unemployed for at least 30 days before you can collect.

Most insurance companies will not insure your mortgage if you resign from your job. You usually need to provide proof to the company that your unemployment was involuntary.

Mortgage insurance can spare you unnecessary suffering and expense if you do happen to be fired, laid off or cut back at your job. However, before you purchase mortgage insurance check out what you are eligible for in terms of government benefits and be sure to shop around and compare mortgage insurance quotes from different companies so that you purchase the best possible type of plan for you.



 

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