Mortgage Insurance Terms and Conditions
First Published: ADawnJournal.com February 28, 2010
Borrowing to pay for a house is something that can raise the hairs on the back of anyone’s neck. With a likely 25+ years’ term on the loan, there is plenty of scope for anything to go wrong and for the mortgage to end up posing you some real problems. Yet people keep doing it because, short of having substantial savings or a large windfall, there is no other way for most of us to own our own home – even if it belongs at least partly to the bank for the first quarter of a century. At the point where the mortgage is paid off in full, that house is 100% yours – something which a lot of people consider one of their proudest moments.
The twenty five years (or more) between taking out the loan and paying it off, though, is undoubtedly a long time. In that time any number of things can happen, which is why most mortgages come with an insurance package on top of the other options. Insurance works the same on a mortgage as it does with most other personal insurance packages. If death, illness or unemployment leave you struggling to pay off the mortgage, the insurance is there for the purposes of paying off the loan (or meeting monthly payments for a period) and freeing you from the financial burden on top of an already undesirable situation. Depending on the nature of the insurance and the contents of the terms and conditions, you could find that the mortgage is a god-send. The key matter as far as this goes is liability.
There are probably no insurance packages available in the world today that do not come with a list of terms and conditions that apply caveats to the insurance you are offered. If you claim on the insurance, it will pay out on the condition that none of the “small print” terms and conditions are violated. Your insurance package is likely to pay out if you can prove that you could not reasonably have foreseen the set of circumstances that necessitate the claim, and that it wasn’t your fault. In case of death, the insurance company may well ask for a medical report. Cases of suicide, or death from a long standing condition that the mortgage holder kept to themselves, can invalidate the insurance.
If health problems make it difficult or impossible for you to bring in enough money to meet the mortgage payments, it is possible that the insurance will come to your aid. Again, though, it is essential that you read the small print because if you suffered from this condition before you took out the insurance, the policy will not pay out in most cases.
Unemployment is another common reason for claiming on mortgage insurance, but this is perhaps the most laden with stipulations. Did you resign from your job? Insurance won’t cover you. Did you get fired for performance reasons? No cover there either. Were you sacked as a result of participation in industrial action? You’re not covered. The list of reasons for unemployment which actually do qualify is shorter than those which do not. If the insurance company judges you to be liable for the situation that has left you in this mess, they will not pay.