Mortgage Protection Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Mortgage Protection Insurance Calculator

Our free mortgage protection insurance calculator can help you find the lowest MPI premiums. Enter basic information about yourself and your mortgage, and we’ll compare rates from different insurers. We’ll also show you how much coverage you need to protect your mortgage. So get started today and give yourself and your family the peace of mind that comes with knowing you’re protected.

What is Mortgage Protection Insurance?

Mortgage Protection Insurance (MPI) is a type of term life insurance policy specifically designed to cover your mortgage payments in the event of your untimely demise. In simpler terms, if something were to happen to you, this insurance ensures that your loved ones won’t have to worry about the mortgage payments on your home.

How Does Mortgage Protection Insurance Work?

At its core, MPI functions similarly to other term life insurance policies. You pay a monthly or annual premium, and in return, the insurance company promises to cover your mortgage payments if you pass away during the term of the policy. However, there’s a distinct difference: while the death benefit of a standard term life insurance policy stays the same throughout its duration, the mortgage protection insurance death benefit decreases over time with the loan. This is because as you pay off your mortgage, the amount the policy needs to cover reduces.

Another key difference lies in the beneficiary. In standard term life insurance, the death benefit is paid to the beneficiaries you designate, allowing them flexibility in how they use the funds. In contrast, the mortgage protection life insurance death benefit is paid directly to the lender, ensuring that the mortgage is paid off.

Mortgage Protection Insurance Cost

The cost of mortgage protection insurance varies depending on several factors. These factors include the age and health of the insured, the amount of coverage needed, and the length of the mortgage. On average, mortgage protection insurance can range from $15 to $50 per month. It’s recommended to compare quotes from different insurance companies to find the best coverage at an affordable price.

Mortgage Protection Insurance

MPI vs. PMI: Clearing the Confusion

It’s common for individuals to confuse MPI with PMI (Private Mortgage Insurance). While both are related to mortgages, they serve different purposes. PMI protects the lender if you default on your mortgage, whereas MPI ensures your mortgage is paid off if you pass away.

Comparison AspectMortgage Protection Insurance (MPI)Private Mortgage Insurance (PMI)
PurposeEnsures that your mortgage is paid off in the event of your death, disability, or sometimes unemployment.Protects the lender from financial loss if you default on your mortgage payments.
BeneficiaryThe death benefit is paid directly to the mortgage lender to cover the outstanding balance.The lender is the beneficiary, as this type of insurance covers losses they might incur.
RequirementOptional; homeowners decide whether MPI adds value based on their financial situation and peace of mind.Typically required by lenders when a homebuyer makes a down payment of less than 20% of the home’s purchase price.
Coverage AmountThe coverage amount decreases as you continue to pay down your mortgage balance.The cost is usually a percentage of the loan amount and does not decrease with the mortgage balance.
Premium PaymentPremiums are paid regularly, often monthly, until the mortgage is paid off or the term of the policy ends.Premiums are often included in the mortgage payment, and the requirement is removed once the homeowner has at least 20% equity in the home.
Policy ControlHomeowners actively acquire MPI, choosing the provider and policy terms.PMI is arranged by the lender with terms set by the lender or by industry standards.
Effect on FamilyProvides peace of mind that your family won’t inherit mortgage debt if you pass away.Does not have a direct benefit for the family; it’s a safety net for the lender.

Is Mortgage Protection Insurance Worth It?

Like all insurance decisions, the answer depends on your personal circumstances. Here are some mortgage death insurance pros and of cons to consider:

Pros:

  • Peace of Mind: Knowing that your loved ones won’t be burdened with mortgage payments can offer immense peace of mind.
  • Simplicity: MPI policies are typically easier to qualify for than standard term life insurance.
  • Decreasing Premiums: As the mortgage balance decreases, so can the mortgage protection plan premiums.

Cons:

  • Limited Flexibility: The death benefit goes directly to the lender, not your loved ones.
  • Decreasing Benefit: The death benefit decreases over time, unlike standard term life insurance, where the benefit stays constant.
  • Cost: MPI can sometimes be more expensive than a standard term life insurance policy.
Mortgage Protection Life Insurance

Comparing Term Life and MPI

Comparison AspectTerm Life InsuranceMortgage Protection Insurance (MPI)
PurposeProvides financial protection to the insured’s beneficiaries for a specified period (“term”).Specifically designed to repay your mortgage if you pass away during the term of your loan.
BeneficiaryThe policyholder designates beneficiaries who receive the death benefit directly.The death benefit is paid directly to the mortgage lender, not to your family or designated beneficiaries.
Coverage FlexibilityFixed death benefit that doesn’t decrease over time, offering more predictability for beneficiaries.Death benefit decreases as the mortgage balance decreases over time.
Use of FundsBeneficiaries have the freedom to use the death benefit for any purpose they choose (e.g., living expenses, education, debts).Funds are solely used to pay off the mortgage balance, with no flexibility for other financial needs.
Policy ControlPolicyholders have control over the term length and coverage amount based on their needs and family situation.Coverage amount and term are typically tied to the mortgage amount and repayment period.
Cost ComparisonGenerally, premiums can be lower and are fixed, based on the coverage amount, term, and the policyholder’s health profile.Premiums might be higher for the same death benefit compared to term life, and the cost remains constant even as the benefit decreases.
Health ExaminationsRequires a health examination for underwriting and determining the policy rates.Often doesn’t require a detailed health examination, making it accessible for those with health concerns.
Additional RidersOffers options for additional riders, such as disability or critical illness coverage.May include riders for job loss or disability that cover mortgage payments for a limited period.
PortabilityPolicy is not tied to any mortgage or property, providing coverage regardless of where you live.Coverage is specifically tied to your current mortgage, and a new policy must be taken out if you change properties.

This table highlights the key differences between traditional Term Life Insurance and mortgage life insurance. While both offer valuable protection, they serve distinct purposes. Term Life Insurance provides more versatile financial protection, whereas MPI is dedicated solely to settling your mortgage liabilities. Making an informed choice between the two involves assessing personal circumstances, financial goals, and family responsibilities. Always consider consulting with a financial advisor or insurance specialist for guidance tailored to your unique situation.

The Best Insurance Companies To Protect Your Mortgage

The life insurance company’s financial rating and the coverage cost are the two most essential elements to consider when selecting the best term life insurance plan. Because all term life insurance plans operate similarly, it’s about ratings and price. The best life insurance companies to protect your mortgage are:

Conclusion

Navigating the world of insurance can be daunting, but with the right information, you can make informed decisions that benefit you and your loved ones. Mortgage Protection Insurance offers a specialized solution for homeowners who want to ensure their mortgage is covered, no matter what. While it has its pros and cons, its value lies in the peace of mind it provides. As always, consult with a mortgage protection specialist or insurance broker to determine the best path forward for your unique situation.

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Frequently Asked Questions

What types of events are typically covered by mortgage protection insurance?

Events that can impact a homeowner’s ability to pay their mortgages, such as disability, unemployment, or death, are typically covered by mortgage protection insurance.

What are the benefits of mortgage protection insurance?

The benefits of mortgage protection insurance include peace of mind, financial security, and protection for the borrower’s loved ones.

What is mortgage protection insurance in case of death?

Mortgage protection insurance in case of death provides financial security for loved ones by paying off the remaining mortgage balance if the insured person passes away.

What is mortgage insurance in case of death or disability?

Mortgage insurance in case of death or disability provides financial protection for homeowners and their families. Mortgage life and disability insurance coverage ensures that if the homeowner passes away or becomes disabled, the policy will pay off the remaining mortgage balance, relieving the burden for loved ones. It offers peace of mind and security during uncertain times.

How do I know if I have mortgage protection insurance?

To find out if you have mortgage protection insurance, check your policy documents or contact your insurance provider. They can provide information on the coverage and benefits that you have.

How much is mortgage life insurance per month?

On average, a healthy person can expect to pay around $50 to $100 per month for mortgage life insurance. However, it’s recommended to obtain a personalized mortgage life insurance quote to get an accurate estimate based on individual circumstances.

Does homeowners insurance cover death of owner?

Homeowners insurance typically does not cover the death of the owner. Homeowners insurance primarily provides coverage for property damage and liability claims. However, it may be prudent for homeowners to consider life insurance to ensure their loved ones are financially protected in the event of their death.

Does mortgage insurance cover death of spouse?

Mortgage insurance typically covers the death of a spouse, ensuring that the remaining partner can continue making mortgage payments. In the event of a spouse’s death, the insurance policy provides financial assistance, either paying off the mortgage entirely or covering a portion of the remaining balance. It provides peace of mind during a difficult time.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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