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Should You Buy Mortgage Protection Insurance?

You can always expect a pitch for mortgage protection insurance as soon as you take out a mortgage. There are several forms of this type of insurance, but it will usually pay off the remaining amount on your mortgage if you die, or it will cover your loan payments if you happen to lose your job of become disabled.

Whether or not mortgage protection insurance would benefit you depends on your financial situation, health, and what you would like to happen after your death. Let’s look at some advantages and disadvantages of mortgage protection insurance and some tips for getting the best deal.

What is MPI?

Mortgage protection insurance (MPI) is oftentimes confused for PMI (private mortgage insurance), but they are very different. Mortgage protection insurance is a form of life insurance, while private mortgage insurance is what protects the lender if you can’t make your mortgage payments and default on your loan.

The cost of MPI will depend on the amount left on your mortgage, your health, your age, and sometimes your occupation. If you decide to get the kind of mortgage protection insurance that will pay off your mortgage after you die, your mortgage company will receive a check from the insurance company, and your heirs won’t be burdened by a mortgage payment.

The payments will also go straight to your mortgage company if you choose the policy based on job loss or disability, but this is only for a certain amount of time. These types of policies will only pay toward the mortgage principal and interest.

Advantages of MPI

  • Mortgage protection insurance is usually simple to get, making it beneficial for those with poor health or high-risk jobs who find it difficult to get insurance.
  • Your heirs are don’t have the burden of paying off a mortgage after your death, especially if you provided the main source of income.

Disadvantages of MPI

  • There is no point in getting MPI if you already own your home completely. It is also a declining-benefit policy, so as you pay your home loan more and more, the payoff amount you would get decreases as well.
  • If the mortgage payment for the home is low, having a policy that only pays off the mortgage, rather than providing a sum to the family for other expenses, might not be the most beneficial.

Saving on MPI

Make sure you shop around first if you decide to purchase mortgage protection insurance so that you can compare prices and get the best deal for the best quality coverage features. If you are considering MPI, you should also consider level life insurance, which would cover your mortgage and your family’s living expenses after you die while also not decreasing in value over time.


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