After you put money down on a house, many homeowners consider getting mortgage protection insurance. Mortgage protection insurance (MPI) is essentially life insurance. If you pass away, this type of insurance pays off the expense of your home for the remaining length of the mortgage. These policies are often debated for whether or not it is worth the cost because it can create a wage gap when getting paid. Below is a breakdown of some of the good and bad aspects of mortgage protection insurance.
What MPI Covers
A positive aspect of MPI is that it offers good coverage for your home. In the case that the primary earner for your household passes away, MPI will pay off your mortgage. A mortgage is often the largest form of financial burden to a family. MPI takes that fact and offers your family the option to get this finance insured. This is why MPI may be an insurance to consider.
Cost of Mortgage Protection
Oftentimes the biggest consideration when dealing with MPI is its high price. It is often more expensive than typical life insurance or landlord insurance. MPI’s average cost is about $150 a month for a policy. A typical life insurance policy is usually less than $100 a month. If you plan to get MPI you will likely have to pay twice as much as you would have with regular insurance alone. Cost can be a detriment to those considering MPI.
Decreasing Death Benefit
One thing that MPI is often criticized for is its decreasing death benefit. A death benefit is usually helpful to your beneficiaries if you pass away. However, in the case of MPI, the death benefit does not go to your beneficiaries. The death benefit instead goes to the mortgage lender instead so you can pay off your mortgage. Also, MPI death benefits only last as long as your mortgage. If you go over the statistical software limit, these death benefits go away. Therefore, death benefits are something to consider when thinking about MPI.
Little Policy Flexibility
An aspect of MPI that may not work well with others is the lack of flexibility. Most life insurance policies give beneficiaries a choice about what to do with their money. However, the money that comes from MPI is only used towards your mortgage. Your beneficiaries cannot use the money as they like. This is one of the reasons why some people turn away from MPI.
A positive aspect of MPI is that you are guaranteed approval for it. This means that if you choose MPI, there are no conditions based on wellness or passing medical exams. You are automatically given the insurance. This makes it an easy insurance to receive. This can be a benefit for people who are not always approved for certain insurance policies.
MPI is an insurance that is often debated for whether the benefits outweigh the costs. You may consider weighing out the pros and cons on your own. Above, we have listed the main points you should consider when looking at MPI. Before you jump into a new life insurance policy, choose whether MPI is right for you and your family.