I just applied to refinance my house – again – after only a year because the interest rates dropped to a level where it makes sense to drop my payment and take out some cash. In reviewing the closing information, it hit me that there sure is a lot of insurance flying around during a mortgage transaction. There's title insurance, private mortgage insurance, homeowners insurance and the lender's mortgage insurance policy, as well.

Fortunately, there's enough equity in my house that I don't have to have PMI, which is primarily for homeowners borrowing more than 80 percent of the value of their home.

Periodically, I'll receive offers from insurance companies for another type of insurance that is not required to purchase my property, but which would give some homeowners a bit more piece of mind about making that new mortgage payment.

Mortgage payment insurance is a policy offered through various companies, such as Mortgage Guardian, Inc. Like many insurance companies, their promotional materials point out all the horrible things that could happen to you if you lose your job and how this policy can "promote credit viability under involuntary job loss circumstances! (sic) For a nominal cost per day, you can preserve and protect your home, avoid foreclosure, and possible bankruptcy.” That nominal amount averages about $60 per month ($720 annually), according to Bankrate.com.

This particular policy pays up to 6 months of mortgage payments for you, allowing your largest payment to be made while you concentrate on your smaller bills, like your car payment, household expenses, credit cards, etc.

Mortgage payment insurance would also give you time to list and sell your house if needed or find a new job and it makes your lender real happy, which goes without saying.

Countrywide Insurance promotes two other type of mortgage payment policies: Mortgage Life Insurance and Mortgage Accidental Death and Disability policies.

These two pay out more than just monthly payments – they pay off the whole mortgage in case of your death or disability, always depending on what type of policy you have in place. (I've always wondered about the value of this type of coverage, since most regular life insurance policies are created for this very task.)

Mortgage Life Insurance pays off most home loans, according to www.cwinsurance.com, the web site for Countrywide Insurance. In the event of death, mortgage life insurance will pay off your mortgage up to a specified amount. The policy requires no medical exam in most cases (unlike many life insurance policies). The policy is determined by three factors:

• Amount of the home loan
• Borrower's age
• Tobacco use

There may be limitations to this type of insurance, according to Legal & General, an England-based group that sells mortgage payment insurance. If you receive some other type of insurance during your unemployment or disability, for instance, your benefit could be reduced. Be sure to ask about the limitations of any type of these policies to make sure you're not paying a monthly installment for protection you may already have through some other type of insurance provider. The mortgage payment insurance provider may offer a monthly payment, all right, but only after all other insurances pay out. Obviously, check the fine print and ask the agent tough questions.

In addition, check with your current disability insurance coverage (if you have it) and see how it pays out in case of long-term illness. Any benefit must first be approved by the underwriter before you receive a check. Does it pay within a few days, weeks or months?

I did find a very useful tool for all homeowners on the Countrywide Insurance web site: their insurance calculator. Plug in your city, zip and square footage of your house and it will calculate the replacement coverage you should be carrying.

Here's the coverage amounts required for a 2,400 square foot home in the following Springfield cities:

Springfield, Va. -- $299,000 @ $124.58/sq. ft.
Springfield, Ill. -- $282,000 @ $117.50/sq. ft.
Springfield, Calif. -- $277,000 @ $115.41/sq. ft.
Springfield, Ohio -- $268,000 @ $111.66/sq. ft.
Springfield, Ark. -- $217,000 @ $90.41/sq. ft.
Springfield, NC -- $215,000 @ $89.58/sq.ft.
Springfield, Mass. -- $215,000 @ $89.50/sq. ft.
Springfield, Tenn. -- $208,000 @ $86.66/sq. ft.
Springfield, Mo. -- $188,000 @ $78.33/sq. ft.
Springfield, Tx. -- $167,000 @ $69.58/sq. ft.

Published: November 8, 2002

Use of this article without permission is a violation of federal copyright laws.

Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.