Best Mortgage Protection Insurance Companies of 2019

If you have recently purchased a home, then the non-stop barrage of advertisements for mortgage protection insurance surely has started. This article will demystify mortgage protection insurance, and review the best mortgage protection insurance companies on the market today.

Best mortgage protection life insurance companies

If you have recently purchased a home, then the non-stop barrage of advertisements for mortgage protection insurance surely has started. This article will demystify mortgage protection insurance, and review the best mortgage protection insurance companies on the market today.

Your home is likely the biggest purchase of your life, but what happens to your home if you die before the mortgage is repaid? If you have a mortgage protection plan in place, the answer is your home will be paid off.

Choosing the wrong mortgage protection insurance company can cost you thousands of dollars. If you are a homeowner considering mortgage protection insurance, do not move forward without reading this article.

Here is a preview of what we will cover

  • What is mortgage protection insurance?
  • What happens to a mortgage when you die?
  • Is mortgage protection insurance required?
  • Does mortgage insurance cover disability?
  • Is mortgage protection insurance expensive? (Hint, it doesn’t have to be!)
  • Is mortgage protection the same as PPI?
  • What are the best mortgage protection insurance companies?

What is mortgage protection insurance?

Mortgage protection insurance is a form of life insurance designed to pay your mortgage balance or mortgage payment if you die, have a critical or chronic illness, become unemployed, or become disabled.

What happens to a mortgage when you die?

If you have a mortgage and die before it is fully paid off, the new owner of your home (usually your spouse or children) will still be responsible for paying off the remaining debt. If your spouse or children cannot afford the payments, the lender will eventually foreclose on the house.

If your home is “above water” (worth more than your mortgage balance), your family can sell your home to pay off the lender. Once the mortgage is paid, they can keep any remaining money.

If your home is “underwater” (worth less than your mortgage balance), your family will be foreclosed on, and the lender will sell the house to cut their losses. In either scenario, your family is forced to move.

If you want to make sure that your family can afford to stay in your home after you die, you need either mortgage protection insurance or life insurance. Both products will provide you with death benefit funds to pay off your mortgage if you die.

While mortgage insurance is very similar to term life insurance, there are several important distinctions between the two. Knowing these differences can save your family thousands of dollars if you were to pass away.

Mortgage Protection Insurance vs. Term Life Insurance

Mortgage protection insurance usually only pays off your mortgage balance, unlike term life insurance, which has a fixed death benefit. For example, if your remaining mortgage balance is only $40,000, your death benefit is $40,000 even if you started with $100,000.

This means that as your mortgage balance decreases over time so does your death benefit. However, your monthly insurance premium does not decrease with the death benefits.

Over time, you will be paying the same monthly payment for significantly less death benefit coverage. This is the most expensive way to pay off your mortgage if you die and often not a good deal compared to buying term life insurance.

In addition to the declining death benefit, your mortgage lender is usually the beneficiary of mortgage protection insurance. So if you do pass away, the death benefit bypasses your loved ones and is paid directly to the mortgage lender.

So why would anyone buy mortgage protection insurance when they can just buy a life insurance policy? Mortgage insurance generally has little or no underwriting, unlike term life insurance.

This makes purchasing mortgage protection insurance easier for people who have a difficult time qualifying for life insurance. However, you do pay significantly more money for this convenience.

Term life insurance for mortgage protection is essentially a term life insurance policy with a term length and death benefit equal to your mortgage length and balance. For example, if you have a 30-year $250,000 mortgage, you would buy a 30-year $250,000 term life policy.

Since your death benefit is locked in, your family will receive the full amount no matter the size of your mortgage. Your beneficiaries can spend the death benefit on whatever they like since it is left to them directly, not the bank.

Not only do you get more death benefit coverage, but mortgage life insurance usually costs less per month as well. In the past, life insurance was a hassle to purchase. However, no-exam life insurance underwriting has changed that.

Today, you can purchase life insurance online without the hassle of a medical exam instantly! This breakthrough in life insurance underwriting has closed the gap between life insurance and mortgage protection insurance.

Does PMI cover death?

PMI does not pay off your mortgage if you die. PMI stands for private mortgage insurance and is usually required if you put down less than a 20-percent downpayment. PMI protects your lender if you do not repay your debt.

Pros and Cons of Mortgage Protection Insurance:

Mortgage Protection Insurance Pros

  • Easy to qualify for
  • No medical exam required

Mortgage Protection Insurance Cons

  • Declining death benefit
  • High rates that don’t decline
  • The lender is likely the beneficiary
  • Coverage ends with your mortgage

Term Life Insurance Pros

  • Death benefit remains level
  • Lower monthly premiums
  • Coverage can be extended beyond your mortgage
  • No medical exam required

Term Life Insurance Cons

  • Need to qualify medically

Is mortgage protection insurance required?

Mortgage protection insurance is not required to get a mortgage. The reason mortgage protection insurance is not mandatory is that a mortgage loan is backed by your house. If you default on your payments, the bank will foreclose on your home to recoup their money.

That said, if you want your loved ones to remain in your home if you die before paying the mortgage, then purchasing mortgage protection insurance is worth it.

A home is more than just a building. It is the neighborhood where your kids will go to school, it’s a short commute to your spouse’s job, and it is an investment for your family’s future.

If anything were to happen to me, I wouldn’t want my family to worry about money. I’d want my children to stay in the same school, and I’d want my wife to be there for our kids, not commuting an extra hour because they had to move.

If you feel the same way, then mortgage protection insurance is required to ensure that if something happens to you, that your loved ones will have a paid off home.

Does mortgage protection insurance cover disability?

Mortgage protection insurance can be highly customizable to include additional protections for disability or chronic and critical illness. These are optional riders that can be added on to your policy or are sometimes built-in.

However, when it comes to morbidity, the language of the triggering condition is critical. Everyone can agree when someone is dead. Not everyone can always agree when someone is disabled. There is a big difference between total disability and being disabled from your own occupation.

We suggest that you read the language of your mortgage protection insurance’s disability trigger carefully. It may be worth it to purchase a stand-alone disability insurance policy to protect your mortgage payment depending on the language of the contract.

Is mortgage protection insurance the same as PPI?

Mortgage payment protection insurance (PPI) is a specific type of mortgage protection insurance that is designed to pay your mortgage payment if you are unable to work due to disability or unemployment.

Mortgage payment protection insurance does have some exclusions though. PPI generally will exclude pre-existing conditions. In addition, if your injury is deliberately self-inflicted, it will most likely be excluded. Finally, pregnancy and childbirth are typically not considered “illnesses.”

Unemployment benefits can be tricky as well. Most benefit plans will not pay out if you quit your job voluntarily or fired due to deliberate misconduct. Generally, there is an exclusion period when you are not eligible for this benefit, usually 90 to 120 days after purchasing the policy.

Is mortgage protection insurance expensive?

For the majority of people, mortgage protection insurance will be way more expensive than purchasing a term life insurance policy to cover your mortgage. With mortgage protection insurance you lock in high monthly rates with a decreasing death benefit.

Why is mortgage protection insurance so expensive?

The reason that mortgage protection insurance is so expensive is because it has little or no medical underwriting. If you cannot qualify for term life insurance, mortgage protection insurance may work for you. For everyone else, it is a bad deal.

In the past, term life insurance took weeks to buy. You needed to take a medical exam and wait for the underwriter to review your medical records before you could get a policy. Today, the industry is different.

Life insurance companies now offer no-exam term life insurance up to $1,000,000 of death benefits! In addition to the death benefit, many companies include living benefits that will allow you to take an advance on the death benefit for a critical, chronic, or terminal illness

What are the best mortgage protection insurance companies?

Mortgage protection insurance is usually sold by banks and mortgage lenders. If you are looking for mortgage protection insurance specifically, we suggest starting with your lender; although, some life insurance companies, like State Farm, still offer it.

If you can qualify for no-exam term life insurance, then term insurance will likely be a better option for you. It is more affordable, provides you with greater death benefit coverage, and can be purchased instantly with no medical exam.

Sagicor Life Insurance Company

Sagicor Life is a leading company when it comes to mortgage protection insurance companies. They offer no-exam term life insurance with death benefits up to $500,000. Sagicor’s life insurance is quick with most decisions made in under 72 hours.

Also, Sagicor allows preferred rates for a qualified applicant without a medical exam. This is rare among accelerated underwriting companies. Quite frankly, with rates as low as Sagicor, there is no reason to take a medical exam for life insurance ever again.

Sagicor Life Insurance Logo

However, Sagicor’s underwriting for preferred rates can be tight. If you have minor medical conditions, you may get a better deal with a different life insurance company.

Sadly, Sagicor currently does not offer a 30-year term policy. If you want to cover your mortgage balance for longer than 20 years, this could be a deal breaker. Also, Sagicor does not include critical illness or chronic illness riders in their term policies.

Sagicor Mortgage Protection Term Life Insurance Pros:

  • A- (Excellent) financial rating from A.M. Best
  • Death benefits up to $500,000
  • No phone interview
  • No medical exam
  • Preferred rates
  • 100% digital process

Sagicor Mortgage Protection Term Life Insurance Cons:

  • No 30-year term option
  • No living benefits for critical and chronic illness

Foresters Financial

Foresters Life express issue term is another great option to protect your mortgage. Foresters’ express issue underwriting has been streamlined to waive the exam and medical records for a maximum death benefit of $400,000 up to age 55 and a maximum of $150,000 from ages 55 to 80.

Foresters Life Insurance Logo

Not many companies will offer non-medical term at those higher ages, but Foresters does.

We are seeing approvals on average between 48-72 hours, and their contracts contain living benefits, for critical, chronic and terminal illness at no additional premium.

Being able to take an advance on the death benefit if you have a critical illness like cancer can be a huge help. You can use your advance to pay off the mortgage early or maintain payments while you recover.

Foresters provides a 25-year term option, which is not standard across the industry. While Foresters does have competitive rates, they only offer one standard rate tier that is pass-fail, but they are willing to take on greater risks than other non-medical companies.

Foresters Mortgage Protection Term Life Pros:

  • A (Excellent) financial rating from A.M. Best
  • Approvals within 72 hours on average
  • Offers a 25-year term option
  • Member Benefits included at no additional cost
  • No medical exam
  • Living benefits for critical and chronic illness included
  • Will donate an extra 1% of death benefit proceeds to a chosen charity

Foresters Mortgage Protection Term Life Cons:

  • No preferred rates
  • Conversion options are limited in scope

Ameritas Life

Ameritas Life’s FLX term life insurance is one of the best mortgage protection insurance companies for term life insurance solutions on the market today. Ameritas Life offers multiple tiers of rates (preferred, standard, and rapid standard) for non-medical underwriting.

The preferred category can reduce the rate for qualified applicants in great health compared to competitors that will only offer a standard rate.

Ameritas Life Insurance Logo

Also, the inclusion of a rapid standard rate makes non-medical underwriting available for people with more complex medical histories.

Not many insurance companies offer preferred or substandard rates with non-medical underwriting, but Ameritas does. If we need to, we can call an underwriter directly to discuss a case. This is a big advantage in placing difficult cases.

In addition, Ameritas includes living benefits for critical, chronic, and terminal illness within their policy at no additional cost. Not only that, but Ameritas’s FLX living benefits term allows acceleration of the death benefit for scenarios, most of all the companies on this list.

Ameritas’ term life policy also has a strong conversion feature that allows you to convert the policy into their indexed universal life policy at any point during the level-term period or before age 65, whichever comes first, regardless of your current health.

While Ameritas’s non-medical underwriting offers many advantages, it does have some limitations.  Ameritas will only offer non-medical underwriting up to $300,000 of death benefits, which is below the top limits of other competitors.

Additionally, Ameritas can be on the slower side of no-exam companies. Underwriting can take a week where other companies can be instant or a few days. Also, Ameritas’ e-deliver system is not as streamlined as other companies.

 

Ameritas Mortgage Protection Term Life Pros

  • A (Excellent) Financial Rating from A.M. Best Company
  • No medical exam
  • Preferred rates
  • Sub-standard rates
  • Robust living benefits for critical and chronic illness
  • Strong conversion option
  • Offers a 25-year term

Ameritas Mortgage Protection Term Life Cons

  • Non-medical underwriting only offered up to $300,000 in death benefits
  • Underwriting is slower compared to other no-exam companies
  • E-deliver technology needs work

Mutual of Omaha

The Mutual of Omaha is another big player in the mortgage protection insurance companies for the term life insurance market. You can purchase a term life insurance up to $300,000 of death benefits without a medical exam from Mutua of Omaha, which coverage most mortgages.

Mutual of Omaha Logo

The Mutual of Omaha express issue term product has built-in living benefit riders for chronic, critical, and terminal illness. Also, Mutual of Omaha includes a residential damage rider and unemployment waiver of premium rider to the policy.

Mutual of Omaha also allows you to add a disability income rider. This is different than a waiver of premium rider that covers your payments if you become disabled. The disability income rider provides income if you become disabled that can be used to pay your mortgage payment.

These riders waive your life insurance premiums if you become unemployed or suffer $25,000 of damage or more to your home, which is a rare feature. Mutual of Omaha also built-in a common carrier death benefit rider.

The common carrier death benefit rider pays an additional death benefit equal to 100% of the original death benefit if you die in an accident while a fare-paying passenger on a common carrier (airplane, train, bus, etc.).

While the common carrier death benefit rider has little to do with mortgage protection, it is still a nice benefit to have. You can also structure the policy to return all your premiums to you if you outlive the term of the policy.

Mutual of Omaha Mortgage Protection Term Life Pros

  • A (Excellent) Financial Rating from A.M. Best Company
  • No medical exam
  • Disability income rider option
  • living benefits for critical and chronic illness
  • Common Carrier Death Benefit rider
  • Unemployment rider
  • Return of Premium Rider

Mutual of Omaha Mortgage Protection Term Life Cons

  • Non-medical underwriting only offered up to $300,000 in death benefits
  • Underwriting is slower compared to other no-exam companies
  • E-deliver technology needs work

Phoenix Life (Nassau Re Life)

Phoenix Life has made our short list for best mortgage protection insurance companies because they have unique features with their underwriting and contract benefits that other companies simply don’t have.

Phoenix Life Insurance Logo for mortgage protection insurance companies

Phoenix Life offers two non-medical underwriting options.  The first term life insurance option is an accelerated underwriting that will waive the medical exam for qualified applicants up to $500,000 of death benefits, but the underwriter reserves the right to order medical records.

Their second term life insurance option is an express issue no-exam term life up to $400,000 of death benefits. This contract is designed for applicants with great health and is issued fast.  We are seeing approvals on average within 48-72 hours, sometimes instantly!

In addition to the ease of underwriting, Phoenix stacks robust living benefits into their contracts.  Both term insurance contracts offer living benefits for critical, chronic and terminal illness.  Phoenix offers a built-in unemployment rider as well.

Phoenix is a great middle market solution for clients looking for quick and affordable life insurance coverage. Phoenix is one of the few no-exam companies that will waive a medical exam for $500,000 and offer a 30-year term.

One weakness of Phoenix life is their financial strength. A.M. Best Company rates them as a B (Fair). We would prefer them to be an A, but Phoenix’s financial outlook has been recently affirmed as stabled.

Phoenix Life Mortgage Protection Term Life Pros

  • Two levels of rates and underwriting
  • Approvals within 72 hours on average
  • No exam
  • $400,00-$500,000 in death benefits offered up to age 50
  • Living Benefits for Critical and Chronic Illness

Phoenix Life Mortgage Protection Term Life Cons

  • Financial strength is stable but not “A rated”

Final Thoughts: Is mortgage protection insurance worth it?

Paying off your mortgage if you die so your family doesn’t have to sell their home is absolutely worth it. However, purchasing standalone life and disability insurance policies usually will be a better deal than mortgage protection insurance for the average consumer.

Term life insurance has many of the advantages of mortgage protection insurance today, such as no-exam underwriting, at lower rates. However, mortgage protection insurance may makes sense if you cannot qualify for traditional life insurance.

FILED UNDER – LIFE INSURANCE FOR DUMMIES

RESOURCES: FHA

Joseph Cirillo of Good Life Protection

Joe is a lifelong learner with a passion for sharing what he has learned with others. Joe has publicly spoken on life insurance in the past to both colleagues at industry conferences and to consumers in educational settings and as a contributor to industry blogs.  Additionally, Joe is studying for certifications such as the CFP, CLU, and RICP to further his professional knowledge.