Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
What is mortgage protection insurance?
Your home is your castle, and if you suddenly can’t make your payments, it’s a good idea to have a way to take the financial pressure off your family. One of these options is what’s known as mortgage protection insurance (MPI).
You may have gotten letters in the mail for MPI that look like they’re from your official mortgage lender with headlines like “FINAL NOTICE! MORTGAGE PROTECTION CARD!” When opened, it talks about how your family will pay for the mortgage if you should die or become too disabled to work.
But is MPI necessary?
Mortgage protection insurance may help prevent foreclosure
If you become disabled, lose your job, or die, MPI may help you avoid foreclosure by paying your mortgage through your policy. This can benefit homeowners who, for one reason or another, don’t qualify for term life insurance.
It’s important to remember that unlike term life insurance, which pays your beneficiaries directly to use the money as they see fit, MPI pays the lender directly. In this case, your heirs may never see any money.
Mortgage protection insurance is not private mortgage insurance
It’s important to remember that mortgage protection insurance isn’t private mortgage insurance (PMI), which is required if you put down less than 20% of the home’s purchase price. Instead, MPI is a type of life insurance designed to pay off your remaining mortgage if you die or become disabled.
This type of insurance is entirely optional, unlike PMI.
Costs of mortgage protection insurance vary
The monthly costs of this type of insurance depend on your health, age, and the amount left on your mortgage. In fact, there are limits when you can sign up for a policy. Generally, the sooner after you close, the more likely your chances are of find the coverage you’re looking for. Premiums are either paid separately or rolled into your monthly mortgage payments. Get quotes from several companies before signing up for MPI.
Do your research before getting mortgage protection insurance
Before committing to MPI, understand how much it will cost and what it does and doesn’t cover. If you’re interested, talk to a trusted financial advisor about the pros and cons and carefully research who offers MPI. This will help you make an informed decision about what’s best for you and your family.