Over the last few blog posts, you have learned about many different types of Insurance that are associated with mortgages and the purchase of a house. I hope you have been able to follow along but, again, if you don’t fully understand yet, I’ll say it again – you are not alone. Two instances come to mind when I think about how confusing the subject of insurance can be:
1. I remember when I first needed Home Insurance and I contacted my friend who is an Insurance Advisor/Financial Planner to ask him if he could help me.
· As we know now, Home Insurance is completely different from Life Insurance, which is what Insurance Advisors and Financial Planners specialize in, so my friend was unable to help me.
2. I also remember when an Insurance Advisor/Financial Planner emailed me to ask me what “Mortgage Default Insurance” was because I kept posting about it on Facebook.
· As we know now, Mortgage Default Insurance is completely different from Life Insurance, so it is of no concern to Insurance Advisors and Financial Planners (it is only a concern to you and the lender).
In other words…don’t feel bad if you have more questions or if you have to re-read the blog posts a few times to understand!
Here is a short summary of all the different types of Insurance we have discussed:
Category 1: Mandatory
Mortgage Default Insurance – protects the lender if you don’t make payments
Home/Fire Insurance – protects the lender (and you) if anything ever happens to your house
Category 2: May be Mandatory
Title Insurance - protects the lender (and you) if anything ever happens to your title (ownership)
Category 3: Not Mandatory but highly recommended
Contents Insurance – protects you if anything ever happens to the possessions in your house
Mortgage Life Insurance – protects your loved ones if you die by paying off your mortgage balance
Life Insurance – protects your loved ones if you die by paying your loved ones a lump sum of pre-determined money
Well, there you have it folks – the 6 types of insurance that will likely come up when you start talking about mortgages and, believe it or not, all 6 types are sometimes called the same thing and/or mistaken for one another. The end. =)
