Benefits of Using Mortgage Protection Insurance
Your property is one of your most essential and expensive assets, and mortgage protection insurance can provide it with a layer of safety. Homeowners can reap several benefits through mortgage protection insurance.
Earmarked Money for Mortgage
A mortgage is perhaps the biggest debt that a person can accrue. With mortgage protection insurance, the money will go straight to the lender, and the ownership of the home will be guaranteed to the beneficiaries.
Usually, MPI policies are issued on a guaranteed acceptance basis and do not require a medical exam. People with health issues or disabilities could really take advantage of this opportunity. But since health is a factor in determining premiums, such individuals would need to pay very high rates, or they would not be eligible for a life insurance policy at all. On the other hand, MPI policies do not have an underwriting process, so the premiums are not as high.
Mortgage Protection Insurance During Unemployment
We are living during times of economic uncertainty. If you suddenly find yourself unemployed, this insurance can be very beneficial.
Cons of MPI
Mortgage protection insurance has quite a narrow scope. It may be able to cover your mortgage expenses, but it may do so at the cost of other immediate financial needs.
More Cash Out of Pocket
The premium paid for the MPI is an added expense for you, particularly if you already have a life insurance policy. Hence, most people consider MPI as an optional insurance policy.
Limited Benefits in Some Cases
If you have almost paid out your mortgage, then getting MPI may not be worth your while. It’s better to save that money for retirement or an emergency fund.
Decreasing Death Benefit
The policy also has a declining payout. It means that with time, you will be paying the same amount of premium, but you’ll be getting less and less coverage as the mortgage pays itself off.
Lack of Flexibility
Although the death benefit can take the financial burden off your family, they may still be left with other expenses that they cannot afford, including medical bills and college tuition.
Mortgage protection insurance is more expensive than a traditional life insurance policy for a person who is in good health. Typically, the premium may be double that of a term life insurance plan.
How Much Does Mortgage Protection Insurance Usually Cost?
The cost of mortgage protection insurance varies and depends on such factors as:
- Your age
- Your occupation
- Geographical location
- Policy coverage and duration
In most cases, the younger you are and the smaller the policy coverage, the less you will have to pay.
Mortgage protection insurance providers may charge you premiums as low as $5.5 per month for policies between $50,000 and $350,000. However, premiums can also be as high as $75 per month.
Moreover, the average cost of mortgage protection insurance is often twice higher than a traditional term life policy.
Is It Worth Getting Mortgage Protection Insurance?
If you have frequent health issues or you are a senior citizen, it can be difficult to get a good life insurance policy at affordable rates. That’s when mortgage protection insurance can be your best and even only option. To find the right policy that matches your needs, you should research the best mortgage protection insurance companies.
However, before you do that, you must look at traditional term life insurance policies first. A term life policy can provide you more bang for your buck than MPI. It can offer you more flexibility by allowing you to choose your policy length and the coverage amount. It may also be cheaper than mortgage protection insurance. Therefore, it is worth comparing term life insurance and mortgage protection insurance quotes to see which of them is the best value for your money.