What kind of mortgage and life insurance is right for you?

There are several types of mortgage insurances and it is not an easy task to understand the coverage terms given the complex nature of those products. Moreover, new insurance products are added every year and consumers will be even more confused.

Private mortgage insurance protects the mortgage lender in case the mortgage borrower cannot make payments. It protects the bank or the lenders, but not the home owner. There are other types of insurances that provide the coverage to the home owner.

Home owners can use regular life insurance by increasing the coverage amount so that in the event of a death of the bread earner, the family members can keep the house without worrying about making monthly payments. But there are other specialized forms of insurance such as mortgage life insurance, which pays off the mortgage balance if the home owner dies. Unlike life insurance, this type of insurance has fewer restrictions and such as lengthy medical exams. Most of the major insurance companies offer mortgage life insurance. Your financial adviser will be able to help you compare and shop for the best policy that fits your needs.

There are other types of coverage options you can choose depending on how deep you want to be insured. Unemployment insurance provides you monthly income, generally for a short duration, until you find another job. This will help you make mortgage payments and cover living expenses while you are unemployed and you will have the peace of mind knowing that you can pay your bills for a while in case you lose your job.

Critical illness insurance provides the living expenses if you are diagnosed with one of the critical diseases such as cancer, heart problems etc. Unlike Life Insurance, the benefit is paid directly to you rather than a beneficiary. You can then use this benefit to help pay for treatment, replace lost income, pay off your mortgage or however else you see fit. A serious illness can change your life forever. Critical Illness insurance provides the financial resources to let you face your new challenges.

Critical illness policies are subject to a host of stipulations and it is not easy to get the coverage easily. They only cover the conditions listed in the policy and only under the specific circumstances noted in the policy. A diagnosis of cancer, for example, may not be enough to trigger payment of the policy if the cancer has not spread beyond the initial point of discovery or is not life-threatening. If you experience stroke, the coverage may not start unless the neurological damage persists for more than 30 days.

As with any insurance service, you should read and understood the terms and conditions that could limit the coverage. If you buy payment protection from your mortgage lender, you may not get optimal coverage and almost always be paying above the market price. If you go with an independent financial adviser, or online provider, you can compare the policies and ensure that you get the right coverage.