Mortgage Protection Insurance. Life Insurance for Your Home

Mortgage Protection Insurance. Life Insurance for Your Home

The image is of a small house held in two hands, with a receiving hand reaching for it. A clipboard with paper and pen resting on it is on the table below the hands. The image is used to signify the security mortgage protection insurance provides

Mortgage Protection Insurance.
Life Insurance for Your Home.

Mortgage Protection Insurance. Life Insurance for Your Home.

If you have a family, life insurance is a must-have. If you have a home, insurance that covers your mortgage is equally important.

But how best to insure your home?

There are essentially three ways:

  • Mortgage Protection Insurance
  • Term Life Insurance
  • Private Mortgage Insurance

How does Mortgage Protection Insurance protect my home?

If you should pass away before you pay off your mortgage, Mortgage Protection Insurance (MPI) will pay your mortgage balance. This ensures your family remains in your home without worrying about how they will afford to stay there.

An MPI payout goes directly to your lender, not your beneficiary. And its payout amount correlates with your mortgage balance.

Mortgage Protection Insurance also goes by the name of Mortgage Life Insurance.

How does Term Life Insurance protect my home?

With a term life insurance policy, you determine your death benefit amount. This enables you to roll your mortgage into your term policy, which will pay off your mortgage along with addressing other financial concerns such as your lost salary, education costs, burial costs, and accrued debt you want to shield your family from having to pay.

So which one is better?

Mortgage Protection Insurance v. Term Life Insurance

The best choice between life insurance and mortgage protection insurance comes down to what makes sense to you and your family financially.

MORTGAGE PROTECTION INSURANCETERM LIFE INSURANCE
Easier eligibility, even if you cannot qualify for any other type of life insurance.You can be turned down for a policy due to poor health or a risky hobby.
Premiums may be more expensive.Lower premiums.
Your mortgage lender is your beneficiary.You choose your beneficiary.
Death benefit payout is tied to your mortgage principal. In some cases, your payout decreases as your principal decreases.Your death benefit amount does not change.
The length of time it takes to pay off your mortgage determines how long your insurance policy lasts.You determine the length of coverage, anywhere from 5 to 30 years.
Some policies only pay out if your death is accidental.Death benefits paid upon your death, no matter what the cause.
No medical exam required.Medical exams required by some insurance companies.
If the payout does not cover the amount owed on your mortgage, your family must pay the balance.Your family is free to use the payout however they wish.
The younger and healthier you are, the less you pay in premiums.Same.

MORTGAGE PROTECTION INSURANCE

  • Easier eligibility, even if you cannot qualify for any other type of life insurance.
  • Premiums may be more expensive.
  • Your mortgage lender is your beneficiary.
  • Death benefit payout is tied to your mortgage principal. In some cases, your payout decreases as your principal decreases.
  • The length of time it takes to pay off your mortgage determines how long your insurance policy lasts.
  • Some policies only pay out if your death is accidental.
  • No medical exam required.
  • If the payout does not cover the amount owed on your mortgage, your family must pay the balance.
  • The younger and healthier you are, the less you pay in premiums.

TERM LIFE INSURANCE

  • You can be turned down for a policy due to poor health or a risky hobby.
  • Lower premiums.
  • You choose your beneficiary
  • Your death benefit amount does not change.
  • You determine the length of coverage, anywhere from 5 to 30 years.
  • Death benefits paid upon your death, no matter what the cause.
  • Medical exams required by some insurance companies.
  • Your family is free to use the payout however they wish.
  • Same.

So what is Private Mortgage Insurance, then?

PMI is insurance your lender may require you to purchase and pay as part of your mortgage payment—especially if your down payment is less than 20% of the home price. PMI protects the lender, not your family. You cannot cancel PMI since it’s rolled into your mortgage payment.

You are free to cancel both an MPI and a term life policy whenever you like.

How to qualify for Mortgage Protection Insurance

Insurance companies consider the following when making underwriting decisions that determine your eligibility and premium payment amount:

  • Your mortgage balance
  • Your age
  • Your health
  • Your credit score

 

Takeaways:

  • Mortgage Protection is exactly what it says it is. It protects your home and the family who lives in it in the event you die unexpectedly.
  • If you’re a homeowner who cannot qualify for any other type of life insurance, MPI is your best bet for protecting your family against losing their home if the unthinkable happens.
  • If you want more control over your coverage, premium, and payout, term life is your best choice.

Compare life insurance companies today

Nick Trawinski

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