Would you like to ensure that your family could afford to stay in your home if a tragedy were to occur? It’s difficult enough to deal with the passing of a loved one. But your survivors may also be financially vulnerable during this critical time if they aren’t able to make house payments.
To protect against the potential for foreclosure, you may want to consider something called mortgage protection insurance. In this post, we’ll explain what mortgage payment protection insurance is and how it might be beneficial.
What is mortgage protection insurance?
Home mortgage protection insurance (MPI) is a policy designed to cover your outstanding mortgage payments if you were to pass away before paying off the loan. It is a term-style life insurance policy that expires when you fully pay off your mortgage. For that reason, you might also hear it called “mortgage protection life insurance”.
How does mortgage protection life insurance work?
Mortgage protection insurance has benefits that are similar to a standard term life insurance policy. Equal payments will be made each month for the duration of the policy.
However, there are two main differences:
- Decreasing death benefits. Unlike a standard term life insurance policy where the death benefit is always the same, a mortgage protection plan has what’s called a decreasing death benefit. This means that the amount the insurer will pay if you die is reduced periodically. This is by design, as the longer you have this policy, the lower your outstanding mortgage balance will be.
- Your family will not be the beneficiary. Instead of your family receiving a large check after you pass away, the mortgage lender will be the beneficiary of the life insurance policy. This means the loan can be directly satisfied by the insurer without your family’s involvement.
To summarize, this insurance policy is strictly designed to make sure that the lender gets exactly what they’re owed and your family can remain in your home.
Isn’t MPI the same as PMI?
No, MPI and PMI are not the same products.
PMI stands for private mortgage insurance. This is an insurance product that borrowers are required to purchase if they get a mortgage with less than a 20 percent down payment. This is because borrowers who don’t bring 20 percent or more for a down payment are perceived to be at a greater risk of default.
By contrast, mortgage protection insurance is completely voluntary. It is not tied to the down payment amount and can be added for up to five years after obtaining a mortgage loan.
How much is mortgage protection insurance?
Peace of mind doesn’t cost as much as you might think. The average cost of mortgage protection insurance for a healthy applicant in their 30s might be anywhere between $16 and $35 per month for $300,000 to $500,000 worth of coverage.
How do I qualify for mortgage protection insurance?
One of the big advantages of mortgage protection insurance is that it has guaranteed acceptance. Applicants can skip a health screening as well as the underwriting process and get approved within seconds.
This can be a big advantage over term policies that may approve or deny you based on a wide variety of criteria such as your gender, age, job, hobbies, if you smoke or not, etc. It also means that if you have a pre-existing medical condition or work in a dangerous job, you won’t get turned down as you might with other types of policies.
Is mortgage protection insurance worth it?
Critics of mortgage protection insurance will argue that many people may be able to find a regular term policy with more coverage for less money. However, this is generally only true for younger applicants and will be heavily dependent on the criteria mentioned above.
In general, when trying to determine if mortgage protection life insurance is worth the cost, perhaps a better question to ask yourself is:
What am I willing to pay to ensure that I don’t leave my loved ones in financial distress?
Plus, since mortgage protection life insurance covers just the outstanding mortgage balance, policy owners can expect to pay much less than other types of life insurance.
If you already have a group workplace life insurance policy, mortgage protection insurance is a great supplemental insurance plan that would be used to cover your remaining house payments, leaving the group policy to take care of your family’s other expenses.
If you’d like to explore your options for mortgage protection insurance, the brokers at Principled Life can find you simple and convenient solutions. We want your family to feel secure and we’re prepared to help you find the best mortgage protection insurance policy. With the right mortgage protection insurance, you finally can have peace of mind that your family will have a place to live even if you’re no longer there to provide for them.
