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Fall 2017  Volume 10, Number 7        

Should You Insure Your Loan Payments?

When you take out a loan, you promise to repay it — no matter what. The problem is that life can throw you some serious curves, such as illness or the loss of a job, that can make it difficult or impossible to honor your agreement.

Fortunately, you can purchase insurance to protect your mortgage or personal loan if you can’t make your payments. There are three main types of insurance that will work in this situation — life, disability and credit insurance. Your broker can help you choose the type of insurance that’s best for you:

Life Insurance

Mortgage life insurance often is offered when you fill out the loan papers for your house. You don’t have to go through a medical exam, which can be good news if you have a medical condition that could prevent you from getting other insurance. The coverage will pay off your mortgage if you die or, if the policy includes a disability component, if you become incapacitated in a way that meets the policy’s definitation of disability. However, the coverage can be expensive.

Term life insurance can be a better option because it has lower premiums, you can purchase the coverage term and limits you want, and you can designate the beneficiaries yourself and not be locked in to making the lender your beneficiary. That way your beneficiaries can use policy proceeds how they choose.

Disability Insurance

Mortgage disability insurance will make your mortgage payments for you if you’re completely disabled because of illness or injury. Coverage can usually be purchased for up to three years.

Individual disability income insurance will replace a portion of your income if an injury or illness prevents you from working. An individual disability income policy may have a more or less restrictive definition of disability than a mortgage disability policy, but the money you receive can be used as you see fit.

Credit Insurance

Lenders will sometimes ask, or insist, that you purchase credit insurance, which guarantees them payment if you are unable to make payments. The insurance often is included in the loan payments. Credit insurance is usually very expensive compared to life and disability insurance The most important thing to know about credit insurance is that you are not legally required to purchase it.

For help deciding which kind of insurance will offer you the most benefit when managing the consequences of your long-term credit decisions, please contact us.


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In this issue:

This Just In...

Individual Health Care Marketplace Faces Serious Hurdles

Smart Ways to Plan for Retirement Savings

Critical Questions to Consider When Designating a Life Insurance Beneficiary

Should You Insure Your Loan Payments?


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