What Is Mortgage Protection Insurance?

As a homeowner, making monthly mortgage payments on time is essential. What would happen to your loved ones if you passed away unexpectedly and your income vanished? No one can predict the future, but a comprehensive mortgage protection insurance (MPI) policy, often known as a life insurance policy, can provide peace of mind.

Mortgage protection insurance (MPI) is a type of life insurance meant to pay off your mortgage in the event of your death; certain plans may also cover mortgage payments (typically for a short time) if you become disabled.

However, MPI should not be confused with private mortgage insurance (PMI), which protects the lender in case of a loan default. With PMI, your heirs will likely continue owing the loan balance in the event of your death.

What is MPI useful for?

• Guaranteed approval. Even if you are in bad health or work in a dangerous occupation, you are guaranteed approval without medical exams or lab testing.

• No guessing. The check is sent directly to the lender for the correct mortgage balance, ensuring that there are always sufficient funds and that your family does not have to manage the funds.

• Protection for disabled individuals. If you become disabled or lose work, some MPI insurance will cover your mortgage payments (typically for a limited period).

What are the shortcomings of MPI?

• Lack of adaptability MPI does not offer beneficiaries an option. The insurance exclusively pays for the mortgage. This means that the money cannot be used for any other purpose.

• A more expensive option. MPI often costs more than term life insurance, particularly for healthy and responsible adults. And some policies do not guarantee that the premium will remain constant throughout the coverage.

• Reduced coverage. As your mortgage debt decreases, so does the policy's payout. You will pay the same amount for less coverage in the long run.

• More restricted age limitations. Typically, MPI plans have more stringent issue ages than term life policies. Some insurers, for instance, will not provide 30-year MPI coverage to anyone over 45.