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Beginner’s Guide To Mortgage Protection Insurance


If you have a mortgage on your home and your family is depending on you to make the payments, you may want to purchase mortgage protection insurance. This is a type of life insurance specifically designed to pay off your mortgage in the event of your death, so your family can remain in the home. Some mortgage protection insurance policies also provide benefits in the event you become seriously ill or disabled.

How Does Mortgage Protection Insurance Work?

Mortgage protection insurance (MPI) is a type of term life insurance. You purchase a policy for a set period of time (usually the length of the mortgage) and pay monthly premiums. If you die during the term of the policy, the death benefits are paid directly to your lender to pay off your mortgage. MPI coverage is also available that pays benefits if you become disabled and are no longer able to pay your mortgage. In that case, the insurance company would make your mortgage payments for you. The policy may not cover property taxes and homeowner’s insurance that your lender maintains in escrow.

How Much Does Mortgage Protection Insurance Cost?

For many people, mortgage protection is one of the most affordable types of insurance. Many insurers do not require you to have a medical exam to qualify. Premiums are based on several factors, including:

  • Amount of coverage (size of your mortgage)
  • Age
  • Health
  • Tobacco use

How Does Mortgage Protection Insurance Differ From Standard Life Insurance?

MPI and term life insurance are similar in that they pay death benefits if the policyholder dies within the term of the policy. However, there are major differences in these two types of coverage:

  • First, with a term life insurance policy, death benefits remain the same whether death occurs early or late in the term. With mortgage protection insurance, the death benefit decreases as the balance on the mortgage is reduced over the years.
  • Second, death benefits with term life insurance are paid directly to your beneficiaries in the event of your death. Your family can use these funds for whatever they need, not just for paying the mortgage. With MPI, the insurance company pays your mortgage lender, not your beneficiaries.

When Should You Get Mortgage Protection Insurance?

If you have health issues, you may not qualify for competitive rates for standard life insurance. In this case, mortgage protection insurance may be an option, as a physical exam is not generally required. This coverage is typically affordable and can be combined with other life insurance policies, such as coverage provided through your employer, to help protect your family in the event of your death or disability. With an MPI policy, you have assurance that your mortgage will be paid off if you die within the policy term.

Mortgage protection insurance can give you peace of mind knowing your family home will be paid for if something should happen to you. It is generally affordable coverage that requires no medical exam. However, depending on your circumstances, it may not be the best option for you. Our friendly agent can advise you on how to get the best value for your life insurance dollars.

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