Mortgage protection insurance is something that many home buyers are told they need. There are many misconceptions about mortgage protection insurance and its importance. So, Powerhouse Insurance will dispel the top 4 myths in this blog post.
Myth 1 – The Only Way To Receive Death Benefit When You Have Outstanding Debt is Through Your Mortgage Protection Insurance Policy
There are indeed many ways to structure your mortgage protection plan to maximize the likelihood of receiving a payout in the event of something terrible happening to you, but this isn’t necessarily one of them. One standard method is to pay off the mortgage in full, which means that even if you die without paying your debts, the insurance company will still be obligated to pay out to your beneficiaries. If, however, you choose to leave your beneficiaries an outstanding balance on your mortgage (which is not uncommon), then it may fall to them to repay the remaining amount.
Myth 2 – You Do Not Have To Disclose The Policy as an Asset
Another common myth about mortgage protection insurance is that it doesn’t have to be reported as an asset on your taxes returns. In reality, any policy that provides cash value should be considered an asset and disclosed accordingly. Mortgage protection insurance does accumulate a cash value over time, even if you’re not paying premiums. I’ve seen numerous cases where people were shocked to find out they owed taxes for this reason; talk with a professional before making assumptions!
Myth 3 – Switching Provider Requires Much Work
Another myth is that switching providers for mortgage protection insurance is a huge hassle. In most cases, this isn’t true! Often, your new provider wants your business just as much as you enjoy their protection plan; many will even make it part of their contract to take care of any necessary paperwork on your behalf.
It’s also worth mentioning that there are some situations where using an existing policy might be preferable to apply for a brand-new one (e.g., if you’re taking on new debt such as a home equity loan). Before signing anything or accepting coverage from someone, it’s always best to run the numbers yourself and see which options make more sense financially.
Myth 4 – My Next Of Kin Will Be Reimbursed The Entire Cost Of My Mortgage
It depends on what type of policy your loved one has. If your loved ones have taken out an individual policy, they might get reimbursed for the total amount. However, suppose they’re using a family floater (which will be more expensive). In that case, it’s possible that only the portion of the mortgage that you received through them would be eligible for reimbursement.
It’s best to talk about any changes in your life with your agent and determine whether or not a new plan makes sense for you at all, regardless of whom you have as beneficiaries on the policy.
A good insurance broker should always offer advice when they hear about a client’s life change, but it never hurts to ask.
Powerhouse Insurance serving Schertz, Texas, provides its customers with the best possible insurance coverage. We have been a leading Insurance Agency since 1996, and we are dedicated to finding you the most acceptable insurance options available.