Is Mortgage Protection Insurance a Wise Investment to Pay Your Home Loan?

Mortgage protection insurance (MPI) protects the lender against losses on your mortgage in case you lose your job or can’t make payments due to illness, injury, or other reasons. Banks and credit unions may offer this type of coverage.

How Can Mortgage Protection Insurance Protect Your Assets?

Mortgage protection insurance will come into effect when the policyholder has a pending mortgage loan. It pays the outstanding loan amount if the homeowner dies or is unable to work due to disability.

Most policies only cover the principal amount and interest, not any extra expenditure associated with a monthly mortgage payment, such as property taxes or house insurance premiums.

What Do You Need to Know Before Investing in  Mortgage Protection Insurance?

It may sound appealing to purchase mortgage protection insurance to ensure that your family members do not have to worry about paying the remaining loan sum even after your untimely death while staying in the shared home.

Mortgage protection insurance, on the other hand, isn’t always the greatest form of protection to have in place for a few reasons, which include:

  1. It costs more than regular term life insurance:

    Mortgage protection insurance premiums are normally rather hefty. Instead of that, you can buy a normal term life insurance policy, which would provide a death benefit that could be used to pay off any outstanding mortgage debt.

  2. Coverage value decreases over time:

    When a homeowner takes out a loan, they must pay it back monthly. The balance decreases as these payments are made. Likewise, if the mortgage balance decreases, the value of the mortgage protection insurance coverage as well decreases.

  3. It offers Limited protection:

    Mortgage protection insurance only covers your outstanding home loan, but surviving loved ones may require assistance with other expenses too. For example, they may want to afford children’s education, run a business, cover monthly expenses, etc. A life insurance policy may cover these expenses by providing death benefits, ensuring that surviving loved ones receive more than just a paid-off dwelling in the event of your untimely death.

  4. No Benefits for Beneficiaries –

    Unlike traditional term life insurance, mortgage protection insurance pays directly to lenders, which means your beneficiaries will never receive any money.

Therefore, anyone considering purchasing mortgage protection insurance must consider these points and check if a term life insurance is enough to protect your dependents and pays off your debts after your death. You can compare both the policies to see which one is affordable and provides better monetary benefits and act accordingly.

For those who have problems buying standard life insurance, however, MPI can provide vital protection that you might not have otherwise — and the extra expense may be worth it.

Looking to buy life insurance that provides extensive financial protection? Contact our insurance agents at Duane Weber Insurance, Inc. today. We will customize your policy according to your current situation and needs.