Matador Insurance Services

Life Insurance Consultant

Purchasing a home is a significant financial investment. Depending on the loan you choose, you may be agreeing to make payments for up to 30 years. But what happens to your house if you pass away or become unable to work? Mortgage protection insurance (MPI) can assist your family in covering your mortgage in certain circumstances, allowing you to prevent foreclosure if you are unable to work. Let’s look at what MPI is, what it covers, and who would require coverage.

What Is Mortgage Protection Insurance?

family with mortgage protection insuranceMPI is a form of insurance policy that assists your family in making monthly mortgage payments if you, the policyholder and mortgage borrower, pass away before your loan is fully paid off. If you lose your work or become handicapped as a result of an accident, some MPI plans will cover you for a limited time. Because most policies only pay out when the insured dies, some companies refer to it as mortgage life insurance.

Key Differences and Similarities Between Life Insurance and Mortgage Protection

The majority of MPI policies function similarly to regular life insurance policies. You pay the insurance a monthly premium every month. This premium guarantees that your coverage is up to date and that you are protected. Your policy provider pays out a death benefit that covers a certain number of mortgage payments if you die within the policy’s term. The conditions of your policy specify the policy’s limitations and the number of monthly payments it will cover. Many policies provide that they will cover the remainder of the mortgage term, but this varies per insurer. Before purchasing a plan, you can browse around for plans and compare life insurance providers, just like you would with any other sort of insurance.

MPI, on the other hand, varies from standard life insurance in a few key respects.

Beneficiaries of the Policy

To begin with, the beneficiary of MPI coverage is the borrower of the mortgage. Your family does not receive a lump sum of money if you die, as they would with a traditional term life insurance policy. Rather, the funds are sent directly to your lender. Because of this, an MPI can serve as a tailored life insurance policy that can address your family’s immediate financial situation.

couple meeting with mortgage companyThis is viewed positively by some surviving members of homeowners. It can be difficult to plan for a large payout, but MPI ensures that the funds will be used to keep your family in their home. However, this implies that your family will be unable to rely on your insurance to cover other expenses. You can’t use an MPI coverage to pay for funerals or property taxes, for example.

Get prices on additional coverage if you’re seeking for insurance to cover bills other than your mortgage.

Insurance Premiums And Acceptance Rates

Second, MPI policies are certain to be accepted. The monthly cost of a term life insurance policy is determined by factors such as your health and occupation. With an MPI policy, you can skip the underwriting procedure because most policies don’t need policyholders to submit a medical exam. If you’re unwell or work in a dangerous or high-risk job, this can be quite beneficial. However, it also means that, for the same amount, the average MPI premium is more than a life insurance policy. This can entail paying more money for less coverage for persons in good health who work in low-risk occupations.

Regulations and Rules

The last distinction between MPI and standard life insurance is the set of rules that must be followed. MPI insurance comes with a number of conditions that can alter your benefits. Most MPI policies, for example, have a condition stating that the balance of your death benefit would follow the amount of your mortgage. Your outstanding debt will decrease as you make payments on your loan for a longer period of time. The more time you keep your policy, the less value it becomes. This is unlike life insurance policies, which normally maintain the same balance during the term.

reviewing mortgage protection insurance documentMany MPI companies also have rigid deadlines for purchasing policies. Most insurance providers require you to purchase your policy within 24 months of closing. Some firms, however, may enable you to purchase a policy up to 5 years after your loan closes. Your MPI provider may potentially refuse to cover you because of your age, as older homebuyers are more likely to obtain a settlement than younger ones.

Is Mortgage Protection Insurance Necessary?

MPI isn’t a prerequisite for obtaining a mortgage. You can buy a property without paying MPI regardless of the sort of loan you use. Though your lender may suggest an insurance, the decision to purchase is entirely yours.

How Long Does Mortgage Protection Insurance Have To Be In Place?

If you purchase mortgage protection insurance, you will be required to pay monthly premiums for the duration of the policy. If you stop paying your premiums, your insurance company may cancel your benefits. You can terminate your policy at any moment, just like most other types of insurance. Keep in mind, though, that you will not receive any of the money you paid to your insurance provider if you cancel.

Protect Your Mortgage With Matador

It’s normal for a homeowner to want to take as many measures as possible against the unknowns of the future. If you have any questions or concerns regarding what you need to know about mortgage insurance please don’t hesitate to reach out to the helpful team at Matador Insurance by contacting us online or requesting a consultation for more information on how to be prepared for any eventuality.