Do You Really Need Mortgage Protection Insurance?

Do You Really Need Mortgage Protection Insurance?

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The thought that you may die or become incapacitated can come to mind from time to time, but if you’re like most people you say a prayer and quickly dismiss these thoughts. Then again, preparing for home decorthe inevitable is always a good idea, especially if your family would be unnecessarily burdened in the event that you can no longer provide financial support.

People who have mortgages or outstanding equity loans must consider all of life’s possibilities with mortgage protection insurance one way to erase the worry that your loved ones will take a financial hit due to your surprise demise.

Is mortgage protection insurance worth it? That depends on how you define “worth” and what you expect to receive in return for this type of insurance.

MPI And PMI Explained

Briefly defined, mortgage protection insurance is a type of insurance that can make mortgage payments as long as you’re incapacitated or even pay off the outstanding mortgage balance in full. If the beneficiary passes away, the insurance plan will most likely pay off the entire mortgage while in other cases make payments until the beneficiary is able to work again. Mortgage protection insurance (MPI) is different from private mortgage insurance (PMI) as the former protects the homeowner while the latter protects the lender.

What You’ll Pay For MPI

There isn’t any standard figure that can tell you how much you’ll pay for mortgage protection insurance. Like life insurance, your premium will be based on a number of factors including your age, your health, outstanding mortgage or equity loan balance, level of coverage desired, and other conditions.  The older you are, the more money you owe on your mortgage, and your personal health factors all weigh in to determine what your premium will be.

In most cases you’ll receive a declining benefit as you pay off your mortgage or pay down your equity loan. Just like certain life insurance plans with a cash value, some mortgage protection insurance options offer a benefit where your premiums are returned at the end of the insurance term. But, inflation will eat up a lot of that benefit, making this a costly option for those consumers using this method as a way to save up money.

Shop Around For Mortgage Protection Insurance

To find out if MPI is truly worth it for you, shopping around and comparing policies is a must. High premiums can negate the value of this type of insurance with other less costly insurance options (e.g., life insurance) providing the same coverage but for less money.


Adv. — Take charge of your money by considering a home equity loan to pay for a new roof, add a family room, or expand your attic. Interest rates are low, especially for the consumer with an excellent credit rating. Please check out our smart money tips today!

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Categories: Home Financing

Comments

  1. Anthony
    Anthony 10 October, 2008, 17:33

    If you have a life insurance policy that covers the mortgage amount (and then some), as well as disability insurance, you probably wouldn’t need it. Perhaps if you are self employed or without these coverages, it would make sense to not leave your loved one with this financial burden.

    Anthonys last blog post..Why Developing Passive Income is Important

  2. Matthew C. Keegan
    Matthew C. Keegan Author 11 October, 2008, 04:48

    Anthony, I agree. It is better to have an insurance policy that is large enough to cover paying off the home, the car, and paying for college and the spouse’s retirement, then having this type of insurance.

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