What is Mortgage Protection?
If you have financed a home in the past 40 years, chances are, you have received a letter (or 20) about the Mortgage Protection Plans that your bank doesn’t offer.
Most people are so annoyed by the volume of letters, they don’t want to have anything to do with whoever is on the other side of the postal onslaught of FINAL NOTICE for eligibility flyers. I can’t fault them. My mailbox is so full of marketing it’s not even interesting to check anymore.
So what is it, this Mortgage Protection? And how do you figure out your options without having to fill out those letters and get a bunch of calls from multiple companies.
Let’s look at the secret behind the Mortgage Protection letter (or 30) that you got in the mail.
Mortgage Protection is the insurance coverage that protects families from financial hardship and foreclosure due to a death or major illness.
At the core of this coverage, it is a life insurance policy (usually term but available for life). The policy pays out no matter the manner of death. Heart attack, the hiccups or a lightning strike. Doesn’t matter. The policy pays a tax free death benefit to your loved one upon your death to take care of those expenses and secure the roof over your family's head.
Even further, the death benefit from your Mortgage Protection assures that your family won't become subject to foreclose to any bank. We all know what happens when the bank doesn’t get 3 payments in a row. They take your Home and Equity, every single penny you paid into that mortgage with your hard earned income. (Doesn’t seem like it should be legal I know, and don’t get me started on how they get to use our money! That’s another blog.)
On top of the Tax Free death benefit, there are three living benefits that should come with a good Mortgage Protection policy. With these Living Benefits, if you suffer from a qualifying health event, you will have access to up to 100% of the death benefit, if you LIVE.
Yes, if you live as so many sufferers of Heart Attack, Stroke and Cancer do, you get access to the death benefit while you are living. (Many other illnesses are covered!)
What we see happen, is a major diagnosis like a Stroke, followed by a long expensive treatment period where usually, you are not working. So what happens if you are laid up in the hospital relearning how to chew after a stroke has put you down and you’re trying to get back up?
Some people are lucky enough to have some sort of short or long term disability but even then, most people can’t survive with the addition of Medical bills, the stress of some catastrophic illness, trying to survive on 40-60% of their income, and what happens after the benefit ends in 6 months or 18 months. It gets tough. Credit cards come out of retirement and your retirement starts to become more like a 10% penalty savings account.
No wonder the top 3 reasons for foreclosure today are
-Job Loss or Reduction in Income
-Debt such as credit cards
-Medical emergency or illness resulting in medical debt
Most people simply can’t make it that long in these conditions. So here’s when your Living Benefits kick in.
Critical Illness:
This is a huge benefit as we see medical advancements and more and more people live after a heart attack or a stroke or cancer. About 80% survive heart attacks or strokes. Critical Illness benefits give you access to a chunk of that , up to 100%, to take back control.
Chronic Illness:
So many people become unable to care for themselves due to illnesses like diabetes, dementia, parkinson’s, cancer, fibromyalgia. If you become chronically ill and need assistance to perform 2 of your 6 Activities of Daily Living, these policies can pay lump sums or monthly benefits, tax free due.
Terminal Illness:
If you are diagnosed with a terminal Illness with a life expectancy of 12 months or less to live, you get access to your death benefit, up to 100%, to take care of the things you want to do while you are still here.
We see people pay the Mortgage, pay medical bills, prescriptions and medical treatments that their health insurance won’t cover, or if they have no insurance because they lose their job due to the illness or another reason, sometimes, this is all they have left.
Some Mortgage Protection policies have a feature that pays you every single penny back if you don’t use the policy by the end of your term. Some homeowners use this chunk to
-drastically reduce their remaining mortgage balance if there is one or even pay it off.
-If the home is paid off, they get to take that money and do whatever they want!
-Many pay up a Final Expense policy to be sure those expenses never fall to their family AND they never pay another premium.
There are other policies that will strategically pay your Mortgage and other Debts off years early by leveraging the cash value of the policy, saving you tens of thousands of dollars in interest and keeping cash available for home improvement and repairs without using high interest credit cards or paying high penalties for borrowing money from retirement accounts. All while protecting your family from a devastating loss of income due to death, major illness or disabilities with Living Benefits. (I Know!!! And there are tax advantages and protection on this money as well.)
Equity Protection is a popular option available to those not able to qualify for Living Benefits. The policies are designed to assure the transfer of the Equity to their loved one and not some bank. They get enough. They don’t need your legacy, although they will take it given the chance.
Mortgage Protection and these other methods are an easy way to put security in place for your families home and financial future.
Schedule your Free Strategic Assessment with me so that we can secure your family's home and financial future in case the day for a contingency plan comes.
