If you have a home mortgage, you’ve probably received offers for Mortgage Protection Insurance (MPI). This coverage will pay off the balance of the loan at your death, leaving your heirs with a home, free and clear. You can also buy a policy that will include mortgage payments for a year or two if you become disabled or lose your job.
Some companies offer MPI on a joint basis that covers both you and your spouse and pays out when either of you die. You can buy coverage when you purchase a home, or at any time until the mortgage is paid. If you refinance, you’ll probably pay a lower premium. If you default on the loan, ask if the insurance company will extend your policy.
Coverage is written on a “decreasing term” basis, which means your premium will remain unchanged, even though the outstanding balance of the mortgage keeps falling. This is because you’re more likely to die as time goes on, increasing the likelihood that the insurance company will have to pay the death benefit.
Companies usually issue MPI on a “guaranteed acceptance” basis, a valuable benefit for homeowners who can’t afford Life or Disability insurance (or can’t get coverage on any terms) because they work in high-risk occupations or have health problems.
Make sure that you understand the difference between MPI and Private Mortgage Insurance (PMI), a policy that most lenders require to protect themselves against the risk of foreclosure when the borrower buy a house with a down payment of less than 20%.
If you’re ready to buy or refinance your castle, and considering MPI, we’d suggest that you check with the Life insurance professionals at our agency.