A sizable sum of money is needed to buy a property, and you might choose to pay back your home loan over 30 years. However, what would happen to your home if you suddenly passed away or could no longer work?
Mortgage protection insurance (MPI) may be able to help your family with the mortgage payment under specific circumstances. For example, you might be able to stop foreclosure if you cannot keep working to pay your mortgage.
Read more to learn about the importance of mortgage protection insurance (MPI).
What Is Mortgage Protection Insurance?
An MPI policy will help your family make your monthly mortgage payments if you, the policyholder and mortgage borrower, die before your mortgage is fully repaid. Some MPI policies also offer coverage for a limited period in the event of job loss or if you develop a disability due to an accident. Some businesses refer to it as mortgage life insurance because most policies only pay out after the insured passes away.
Some policies are designed to help your loved ones or other occupants of your home pay the mortgage in the case of your passing. For instance, if you have MPI coverage and are still paying off your mortgage when you die, your insurer will give your lender the balance.
You won’t need to be concerned about making the last few payments or giving the house to your spouse or heirs. Matador Insurance Services offers a step-by-step program to ensure you receive the right insurance plan.
Do You Need To Have Mortgage Protection Insurance?
A mortgage is not required to have MPI. Therefore, you can purchase a property without paying for MPI, regardless of the loan type you select. Although your lender could suggest particular insurance, buying one is entirely up to you.
Pros and Cons of MPI
Mortgage protection insurance is usually only an option if you can’t get ordinary disability or life insurance or if the rates for a traditional policy are too high for you to afford. If you find yourself in this situation, you should consider the benefits and drawbacks of mortgage protection insurance.
- Acceptance assurance – Most MPI insurance is provided with “acceptance assurance.” This can be useful for those with health difficulties who either have to pay higher life insurance premiums or struggle to get a policy.
- Tranquility – The economy is unclear right now. If you lose your job, having MPI coverage that will pay benefits can be helpful.
- More money leaving your pocket – The MPI premium puts more pressure on your monthly budget.
- Limited benefits in some circumstances – Purchasing an MPI coverage is often not a sensible use of your money if your mortgage is nearly paid off or if you purchased the home using the proceeds from the sale of another home. Instead, you might amass the money in an emergency fund or retirement account. Additionally, if you want to make additional payments to pay off your mortgage sooner, you will not benefit from MPI as much since the loan payoff amount decreases as you pay down the mortgage.
- Possibilities for better options – Because MPI is directly paid to your lender instead of beneficiaries, it won’t provide your loved ones with any financial security other than to pay off your mortgage in the case of your passing. It might make more sense to buy a life insurance policy because the proceeds are delivered to your beneficiaries, who can then determine how to distribute the money (whether to the mortgage or elsewhere). In addition, the cost of life insurance for nonsmokers in good health is often less than that of MPI.
Cost of MPI
The price of your mortgage protection insurance will depend on various factors, including your age, the number of years left on your mortgage, the remaining mortgage balance, and the type of coverage you desire. While many insurance companies are raising insurance prices, Matador Insurance Services continues to offer quality insurance at an affordable rate.
According to sample rates calculated by the U.S. Department of Veteran Affairs, a reliable source whose quotes reflect the market, a 30-year-old applying to cover a $500,000 mortgage over 30 years can anticipate paying about $60 per month. Like any other type of insurance, rates will vary depending on the company.
Is Buying MPI a Good Idea?
The primary reason why many people get life insurance is to pay off outstanding debt, such as a home mortgage. If your age, health, or other factors prevent you from obtaining a life insurance policy, you should consider purchasing mortgage protection insurance instead.
Since buying mortgage protection insurance can be so beneficial, it pays off to have it in the long run. So if you’re ready to get the coverage, get in touch with Matador Insurance Services today!