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The Pros and Cons of Loan Protection Insurance

If you've taken out a mortgage on your house or taken out another type of loan then chances are you've received several offers to obtain loanآ protection insurance. In general, loanآ protection insurance will provide you coverage for a part or the entire amount of your monthly loanآ bill in the case that you become unemployed or disabled for a certain amount of time. A majority of these policies will pay down the entire amount of your loan if you pass away prematurely. However, policies differ from agency to agency, and so you must know what a policy offers for its price. When considering a mortgage protection insurance policy it's important to look at the pros and cons to determine if a policy is worth it for your situation.

Con: Has a Declining Value

For example, if you decide to take out a $100,000 life insurance policy and keep paying the premiums throughout your life then your heirs will be given the $100,000 no matter when you pass away. On the other hand, loanآ protection insurance works a little differently as it only will cover the payoff amount of your loan. This goes down each time you make a payment each month, and so this means that if you've taken out the loan 10 years ago, and your payoff amount was $100,000 then your payoff amount will decline significantly as you would have made a lot of payments on it. However, despite the decreasing payoff amount, you will likely still be paying the same amount for the premium on your insurance policy.

Pro: Gives You Peace of Mindآ

As with any type of insurance policy that you obtain, there's no way to predict if you'll actually end up using the policy. However, making sure that you have a safety net by obtaining the needed insurance policies will give you peace of mind in knowing that if the worst occurs you and your family will remain protected. It can be a huge worry to think every day about who will pay off your loansآ if you become disabled or become unemployed. However, by obtaining the right loanآ protection insurance policy, there won't be any need to stress out and you'll know that no matter what your loansآ will be paid off.

Con: There Are Maximum Payment Limitations

If you end up unemployed then your loanآ protection policy will not typically give you the amount of money that equates to what you'd normally obtain in terms of monthly wages. Instead, the amount that you receive will be determined in the policy's contract policy, and will be a certain set amount or a percentage of your paycheck. Although this may not seem like its fair, insurance companies set up this limitation to the amount you can receive in order to motivate people to return to work as quickly as possible.

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Pro: Extremely High Acceptance Rate

There are only a few reasons as to why a loanآ protection insurance agent will turn you away from obtaining one of their policies. Some people depend on their disability or life insurance policy in order to cover the cost of theirآ loans, however others find it hard to obtain a life insurance policy due to the fact that they are too old or have a pre-existing medical condition that makes it impossible to obtain a policy. If you are someone in this situation, then obtaining a loanآ protection insurance policy can be your best option in order to ensure that your family's standard of living remains protected no matter what life throws your way.

Con: There May Be Better Optionsآ

If your loanآ only requires a small payment each month then obtaining a loanآ protection insurance policy may not actually be worth the commitment. Instead, you may want to invest conservatively into an emergency fund that will give you a nice cushion that will let you keep making monthly payments if you become unemployed or have a disability. By beefing up your emergency fund to have around 3 to 6 months of your salary, you can ensure that you're able to remain up to date on all of your bill payments including your loanآ payments without needing to give up your monthly premium to the insurance company.

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