Mortgage protection insurance (MPI) provides protection against financial disaster in case a breadwinner of the household dies before the mortgage is paid off. It can give you peace of mind, knowing that your mortgage will be covered if a tragic accident or illness leads to death or disability.
How Mortgage Protection Insurance Works
When tragedy strikes, mortgage protection insurance can help save your home. You pay a set premium for the duration of the policy. If you should die during the policy period, the insurance company pays out a death benefit. In the case of a disabling injury, MPI makes it possible to continue making your monthly mortgage payments.
The type of death benefit depends on the type of policy you put in place. In the past, mortgage protection insurance was designed to pay off the outstanding balance on the mortgage. Today, many policies will pay out the full amount of the original mortgage, regardless of how much you still owe. Beneficiaries can use the funds to pay off the mortgage in one lump sum or for any other purpose.
You can buy the policy when you purchase your home, or within a certain time period after closing. The time limit is generally 13 to 24 months, although it may be as long as 5 years with some companies. This insurance is typically issued on a guaranteed acceptance basis, which is valuable for people who have health issues and might be uninsurable or only insurable at a higher rate.
Pricing for mortgage protection insurance depends on the age of the insured, the size of the mortgage, and whether the insured is a smoker. If you are buying, or have recently bought, a home, our local agent at Morin Associates LLC in Groton, Connecticut, can assist you with mortgage protection insurance.