If you’ve got a mortgage, you know that you are going to be on the hook to your lender for decades to come. And a lot can happen within such a lengthy span of time. Some of these things could prevent you from making your mortgage payments on time. When these circumstances arise, savvy homeowners are happy that they preemptively purchased low mortgage protection insurance.
What is mortgage protection insurance? In this article, we’ll explain what this type of coverage is, what it entails, and what it does not. Continue reading to see the answers to the most frequently asked questions about mortgage protection insurance.
Mortgage protection insurance (aka mortgage protection life insurance or MPI) is a specialized type of life insurance that focuses solely on the policy holder’s mortgage.
Depending on the terms outlined in the MPI contract agreement, the policy can go into effect when:
No. MPI is 100% optional and is typically added to the monthly payments that you pay toward your mortgage’s principal and interest.
Mortgage protection insurance does not cover anything except for the interest and principal that’s applied to your mortgage loan. So, your MPI coverage will not include other associated costs like homeowner’s association fees, property taxes, or your existing homeowner’s insurance policy.
Unlike MPI, which covers the borrower, private mortgage insurance (PMI) covers the lender. PMI is a separate insurance policy that reduces the risk of financial loss where the lender is concerned, as it only goes into effect if the homeowner defaults on their mortgage.
Typically, your mortgage lender will be the first to offer you a mortgage protection insurance policy. But you do not have to go with their offered policy/policies. Same as with your homeowner’s insurance, you have the option to accept what’s on offer or shop around for a policy that better fits your needs. There is no penalty for choosing a different insurance company to facilitate your MPI policy, but you may save some money by going with the policy afforded by your lender.
Just like with other life insurance policy types, the cost of your MPI is going to be largely determined by your age and the state of your health. The older or more ill you are, the more expensive this type of life insurance coverage will be.