If you’ve recently purchased a home or refinanced your current mortgage by now you’re mailbox has been inundated letters that look like they are coming from your lender -but they really are not.

These solicitations are coming from Mortgage Protection companies that paid good money to search public records to find you. So, is Mortgage protection necessary? The answer is ‘Yes and No.’ That may sound contradictory, but stay with me.

First, understand that Mortgage Protection (also called Mortgage Protection Insurance) is completely different and in no way related to mortgage insurance. This is the biggest misnomer and easily confused.

Mortgage Insurance is a fee that charged by the lender to protect them if you happen to default on the loan. There are ways to avoid MI, for instance, by making a down payment of at least 20%. The lender typically does not require MI when you have enough of your own skin at risk.

If you don’t have enough to put down, they make you pay the MI fee which is rolled into your monthly payment. Should you default on your loan, the MI you’ve been paying will help them recover the money owed. MI does nothing to benefit you, the borrower.

Mortgage Protection on the other hand, is for you, the borrower. Should something change and make it difficult for you to pay your mortgage, Mortgage Protection is there to keep you afloat so you DON’T default on your loan.

Secondly, understand that ‘mortgage protection’ is life insurance structured to span the length of the loan. Regardless of the bells and whistles it may have, all Mortgage Protection plans offered are life insurance contracts.

* If you have a very nominal balance on your mortgage 
* Carry adequate permanent life insurance that has cash availability or 
* If you have resources to pull a substantial amount of money from

Then ‘No,’ you can probably forgo Mortgage Protection insurance.

That being said, ‘Yes,’ you need mortgage protection if you fall into the category with 97% of Americans.

* If you do not have the principle balance of your loan laying around somewhere 
* If you would be impacted by reduced or temporary loss of income 
* Or if you share the mortgage payment with someone and are dependent on them to do so.

Don’t listen to people who won’t be there to help you if one of these situations were to occur. I’ve read unintelligent writings from people proposing taking $200 and putting it in a safe investment to get a better return over a particular period of time.

This is nonsense. The objective is not to see how much money you can earn by putting what you pay in premiums and investing it. If you’ve ever been involved in a car accident or had water damage in your home, when the claims adjuster sent you the check for the full amount of your loss, I’m sure you were not griping about being able to have the same amount somewhere else had you saved the money yourself.

It doesn’t take a genius to figure out that Insurance is the cheapest money you can buy. By paying a monthly premium cheaper than most cell phone plans, you can instantly secure a 1/2 million dollar benefit should you ever need it. Now that, as they say -You can’t beat with a bat!

So to review: Most of us with a mortgage, should consider Mortgage Protection, especially during the first 15 years of the mortgage when you have the least equity and your expenses are on the uptick.

Be very cautious moving forward, however. There are lots of Mortgage Protection products out there. There are even lenders offering similar programs, but there is a lot to understand before you purchase. Feel free to check out my article “Top 10 Hard-to-Find but Must Have Features on your Mortgage Protection Policy” for more detail.