Just Closed on a Lake Norman Home? A Mortgage Protection Checklist

Congratulations on the new home. Whether you moved to the lake for the water, the schools, or a shorter drive, closing day is a big milestone.

Within a few weeks, many new homeowners notice something else: envelopes about "mortgage protection." Some look like official notices from your lender. They usually aren't. Because mortgage records are public, insurance marketers can see that you recently bought a home.

That mail doesn't mean you have to act fast, and it doesn't mean you should ignore the idea either. Protecting the home is a reasonable goal. This checklist is meant to help you think it through calmly, on your own timeline.

Step 1: Gather your numbers

Before you talk with anyone, it helps to have a few facts in front of you:

• Your loan balance and how many years are left
• Your monthly payment, including taxes and insurance if they're escrowed
• Who on the loan earns income, and roughly how much each person contributes to the household
• Any life insurance you already have, including coverage through work

That last one matters. Group life insurance through an employer can be helpful, but it often ends or changes if you leave the job. It's worth knowing what you have and whether it would follow you.

Step 2: Picture the "what if"

This part isn't fun, but it's the heart of the decision. Ask yourselves: if one of us passed away, what would we want the surviving family to be able to do?

• Pay off the house completely?
• Keep making the payments for a number of years while they adjust?
• Stay in the home, or have the freedom to move without pressure?

There's no right answer. Some families want the home owned free and clear. Others care more about replacing income so daily life can continue. Your answer helps decide how much coverage makes sense and for how long.

Step 3: Decide who should be covered

When two people share a mortgage, it's common to look at coverage for both, especially if the household depends on both incomes. If one spouse stays home with children, it's worth thinking about what childcare and household help could cost if that person weren't there. Coverage can be sized differently for each person.

Step 4: Match the length to the loan

Mortgage protection is usually life insurance with a term chosen to line up with your mortgage. If you have 30 years left on the loan, a 30-year term is one option. If you plan to pay the house off early, or expect to move in 10 or 15 years, a shorter term may fit. Your agent can show you how the price changes with different lengths.

Step 5: Look at the details that matter

When you compare options, look past the monthly price and ask:

• Who receives the money? With the life insurance policies we compare, your chosen beneficiaries receive the benefit, not the lender.
• Does the benefit stay level or decrease? A level benefit stays the same even as your balance shrinks.
• What riders are available? Some plans offer options related to serious illness or other features. Availability and cost vary.
• Is there a medical exam? Some plans use health questions only; others may require an exam. It depends on the insurer, your age, and the amount.

Our guide to mortgage protection vs. term life insurance goes deeper into how these two approaches compare.

Step 6: Don't wait too long, but don't rush

Life insurance prices are based partly on your age and health when you apply, so there's a practical reason not to put it off for years. At the same time, a high-pressure phone call isn't a reason to sign anything. A good agent should be comfortable letting you take a few days to think it over.

Step 7: Put it in writing for your family

Once you have coverage, tell your spouse or another trusted person which company issued the policy and where the documents are. Keep a copy with your other home papers, like the deed and closing documents.

Frequently asked questions

Is mortgage protection the same as the PMI on my loan?

No. Private mortgage insurance protects the lender if payments stop. It doesn't pay your family if you pass away. Mortgage protection life insurance pays the beneficiaries you choose.

I got a letter that looks like it's from my lender. Do I have to respond?

Read it carefully. Many of these letters come from marketing companies, not your lender. If you're unsure, call your loan servicer using the number on your statement.

What if we refinance or sell?

Life insurance generally isn't tied to a specific loan, so a policy typically stays with you if you refinance or move. Confirm the details with your own policy.

Can I get coverage if I have health issues?

Often, yes, though options and prices can vary. Insurance companies look at health differently, which is one reason comparing several can help.

Talk with a local agent

Matt MacMillan is an independent agent in the Lake Norman area who compares mortgage protection and term life options from multiple insurance companies. If you'd like a second set of eyes on the mail you've received, or real numbers for your situation, he's happy to help. You can also read more on The MacMillan Agency's main site.

This article is general information, not a quote, an offer of coverage, or legal, tax or financial advice. Coverage, rules, features and availability may vary by insurance company and state, and all coverage is subject to underwriting.