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Mortgage Protection Insurance (MPI) can help ensure your home is paid off if you pass away unexpectedly, protecting your family from the burden of mortgage payments. But like any type of insurance, it’s important to understand your options before you buy. Here are four key tips to help you choose the right MPI policy for your needs.
Is Mortgage Protection Insurance the same as Private Mortgage Insurance? In short, no. Private mortgage insurance protects your lender, mortgage protection insurance protects your family. Learn more about the difference & which one is right for you.
1. Understand How Mortgage Protection Insurance Works
MPI generally comes in two forms: traditional term life insurance and credit life insurance.
- Term life insurance pays a death benefit to your beneficiaries, who can then use the funds to pay off the mortgage or cover any other financial need. This offers flexibility and often comes at a lower cost than credit life insurance.
- Credit life insurance is typically sold by lenders and pays the remaining mortgage balance directly to them. While this ensures the mortgage is taken care of, it can be more expensive and less flexible.
Why choose term life? Many homeowners prefer term life insurance for its adaptability, since the payout can cover more than just the mortgage. However, credit life insurance may appeal to those who want a straightforward, automatic payoff of the loan balance.
The upside to credit insurance would be that the coverage automatically lowers with the decreasing balance of your mortgage. However, it is often the case that the monthly premium will stay the same, even as the coverage decreases. Everyday Life Insurance uses a strategy called term laddering to build a traditional term life policy where both coverage and cost decrease in line with your mortgage balance. Learn more about term laddering.
2. Compare the Cost of Different Options
Costs vary widely between MPI products. Term life insurance is often the more affordable choice, especially for healthy applicants who qualify for lower rates through traditional underwriting.
Credit life insurance, while simpler to get, can come with higher monthly premiums—sometimes even as coverage decreases over time. Comparing quotes from multiple providers is the best way to see the true difference in cost.
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3. Review Your Current Life Insurance Coverage
Before purchasing a new policy, take a close look at any life insurance you already have. If your existing coverage is large enough to pay off your mortgage and meet other financial needs, you might not need additional MPI.
If there’s a gap between your mortgage balance and your life insurance payout, you can either increase your current coverage or purchase an MPI policy to close the gap.
4. Shop Around for the Best Fit
Not all MPI policies are the same. Premiums, terms, and features vary significantly, so it’s worth comparing several providers before deciding.
Working with an independent insurance agent can be a smart move—they can access quotes from multiple companies and recommend options that match your needs, rather than pushing a single product.
Try Everyday Life’s Mortgage Protection Insurance Calculator
The cost of mortgage protection insurance differs for everyone, but it’s generally quite low compared to the cost of the overall mortgage.
If you’re concerned about what would happen to your home if something happened to you, mortgage protection insurance is worth exploring. One company we recommend checking out is Everyday Life, which offers an easy-to-use online mortgage protection tool that can give you a personalized quote in seconds.
You simply enter a few basic details about yourself and your mortgage, and Everyday Life’s calculator will recommend a custom plan. You can then adjust your coverage to fit your needs or move forward with an application right away.
If you’re shopping for Mortgage Protection Insurance, skip the extra steps. Try Everyday Life’s Mortgage Protection calculator now to see what offers await you.
Reviewed and edited by Albert Fang.
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Article Title: 4 Tips for Buying Mortgage Protection Insurance
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