September 2018 NEWSPAPER PUBLICATION; Focusing on: MORTGAGE PROTECTION INSURANCE

Mortgage Protection Insurance is a life Insurance Policy that pays off your mortgage loan if you or your partner die during the term of the mortgage. It runs for the same length of time as your mortgage loan.

So if you take out mortgage loan that last 20 years, your Mortgage Protection Insurance must also be in place for 20 years. If the insured dies during the period, the insurance company will pay the policy benefit which is the balance loan payment directly to the mortgage lender. If there is any money left over after the mortgage loan has been paid, the lender passes the remaining amount to the insured’s family or estate as the case may be. The beauty about Mortgage Protection Insurance is that the insured can change his insurer during the term of the policy if he/ she finds better value elsewhere.

by law, your mortgage lender must make sure that you have this Mortgage Protection Insurance Cover before taking out a mortgage. However, your lender may allow you to take out a mortgage without having Mortgage Protection Insurance if;

(1) You are buying an Investment Property

(2) You are over 50 years old

(3)  You cannot just get this Mortgage Protection Insurance to buy

(4) You have a life insurance in place already.

That means you can actually use an existing life insurance policy as long as it is not already pledged or assigned to cover another loan or mortgage and it provides enough cover. Mortgage Protection Insurance does not cover the principal loan repayment if the insured can no longer work due to redundancy, sickness or disability. For this type of cover, the insured may need to consider other types of Insurance Policies such as Income Protection or Loss of Job Insurance, Serious illness or Payment Protection Covers.

TYPES OF MORTGAGE PROTECTION INSURANCE

Reducing Term Cover: Generally, your Mortgage Protection Cover reduces over time as the amount you owe is going down when you are repaying your lender. By the end of the mortgage term, the cover will have reduced to Zero as the mortgage will then have been fully repaid as at when due without incurring additional interest. It is the most common and cheapest form of life cover.

Level Term Policy: This is the more expensive type of Mortgage Protection Policy. Under the level term Mortgage Protection Policy, the amount you are insured for and the premiums you pay remain level. This provides the insured with the same amount of life cover throughout the mortgage term.

This Level Term Policy is usually used for an interest-only mortgage or an endowment mortgage where the original mortgage amount is still owed until the end of the mortgage term.

THINGS TO KNOW ABOUT MORTGAGE PROTECTION INSURANCE

(1) If the insured dies, the Insurance Company pays the policy benefit directly to the mortgage lender (Mortgage Bank).

(2) The mortgage lender uses the amount needed to pay off the mortgage loan in case of death. If there is any money left from it, they will pass it on to the insured’s estate. But if the policy is not enough to pay off the mortgage loan in full, part of the mortgage will still be owed by the insured’s estate.

(3) If you have a mortgage in your own name only, you would generally look for a Mortgage Protection Policy to cover your own life. If as a couple your mortgage is in joint names, your Mortgage Protection Policy will also need to be in joint names. This means that your mortgage is paid off if either one of the couples dies before the end of the mortgage term.

(4) Most mortgage lenders will offer to arrange Mortgage Protection Insurance for you when applying for a mortgage loan. You do not have to take the Mortgage Protection Policy from your lender cannot refuse you a mortgage lending just because you don’t accept the Mortgage Protection Insurance they recommend.

(5) It is advisable to buy Mortgage Protection Insurance Policy even if you already have a life insurance policy. This is because as we have explained, Mortgage Protection Insurance is designed to pay off your mortgage loan in case of death and does not necessarily provide a cash sum payment to your family. So it is always good to have a separate life insurance policy to take case of your family in the event of death.

Most Insurance Companies in Nigeria that sells Mortgage Protection Insurance deals with only federal mortgage banks, Customers. Their reason is that federal mortgage banks always make sure that the mortgage loan they give out to borrowers are channeled into building or buying homes and not diverted to other personal things.

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