When you apply for a mortgage, you often have the choice to also take out a mortgage loan for this loan. A mortgage loan is simply summarized insurance that goes in and helps if certain conditions are met. It is not possible to say whether you should always obtain a mortgage loan or not because it is your financial situation that governs it all and how you value the extra security yourself.
The advantage of a mortgage loan is that you get a greater security, but at the same time the insurance costs money like all other insurance. Thus, as with regular insurance, you must weigh the benefits against having to pay extra money. In some cases you may feel that it is worth it and in other cases you may find that it is not needed.
What does a mortgage loan cover?
This type of insurance is divided into two different parts. Some lenders offer an option where you can take out part of the insurance but ignore the other. Other lenders do not offer this choice, but both are included in the insurance.
Unemployment and unemployment – This part of the insurance helps you in case you lose your job or become incapacitated for any other reason such as injury or illness. The amount that you have chosen to insure will be paid out to cover the cost of the mortgage while you are out of work or unable to work. This part of the insurance usually extends until you are 65 years old.
Life insurance – If the policyholder dies during the time that a mortgage loan exists, the insurance will pay off the entire loan or parts of the loan according to the insurance terms. This part applies until the policyholder is 75 years. This means that you do not have to leave a mortgage to your loved ones in case you die.
What is required to take out the insurance?
The terms may vary from lenders to lenders, but so much as to give you an idea of what the terms often look like, here we list some common ones.
- Must be at least 18 years old but not yet 60 years old.
- Registered in Sweden.
- Have a mortgage with the lender you want to insure with.
- Be fully working. This means that you must have a job and not be on sick leave. Good to know is that it is also often required that you have had the insurance for 150 days if you are going to get some money in case you are terminated. The reason for this is that you should not be able to take out this type of insurance when you already know that a termination is coming.
- Not having knowledge of illness. You obviously do not know that you are sick already when you take out the insurance. You must have had the insurance for 30 days before it applies to illness. The fact that it is clearly shorter here than at termination is because you rarely know in advance when you will get sick.
- You must also have been unable to work for any length of time for the past six months. If you have just come back from a longer period of sick leave, for example, you have to wait a while before the opportunity to take out the insurance exists.
What does it cost?
It is impossible to say exactly what an insurance of this kind will cost. But a little in general you can say that if you want to insure a cost of USD 1,000 per month against illness, this will cost less than USD 50 per month. If you want to insure for USD 15,000 per month, this costs around USD 600 per month.
When it comes to life protection, the age factor will play a part as well. If you are young and want to insure USD 900,000, this costs around USD 100 per month. But if you are older, it can cost over USD 1,000 per month. For this reason, it may not be worthwhile to obtain insurance in the same way for the elderly, but it is a trade-off that you have to make if you think it can be worth the money.
Should you take out mortgage protection or skip it?
The constant question, of course, is whether or not to have insurance. It is usually the same with all insurance policies. Usually you usually feel that you pay a lot of money for nothing until the day you need to take out the insurance. That day you are happy to have it. It is the same with loan protection.
As I said, we cannot say that you should do one way or another here. It is simply about weighing the risk against the cost. It is largely a matter of money. Obtaining mortgage protection costs money and you may try to weigh the increased monthly cost against how much extra collateral you provide.
If you feel you can afford to spend the extra money without spending too much on your budget each month, this may be something to consider. If you become ill or unemployed, it can quickly become difficult to manage the payments, as you have less income. Then mortgage protection can be a savior in need. The alternative is simply to have a good buffer so that you have a lot of money saved for unexpected financial changes, so that you can afford to pay loans and other costs even if you get lower incomes or end up with unexpected expenses.