Mortgage Protection Insurance Benefits And Drawbacks
Mortgage protection insurance offers both benefits and drawbacks, and can be a source of confusion for some home buyers. This insurance is completely different from private mortgage insurance, although the two are commonly confused. While PMI covers the first 20% of your home if your down payment is less than this amount, MPI will make your mortgage payments if you can not because you have been disabled, laid off, or pass away.
The benefits of mortgage protection insurance include the fact that this insurance is considered a guaranteed acceptance policy. Not matter what your age, health, or income is you can get this type of insurance from mortgage insurance companies, but your rates are determined by evaluating your risks. This type of policy will cover the mortgage payments on your home and allow any life insurance proceeds to be used for other purposes if you have both coverage types. You can get MPI even if you can not get disability or life insurance any other way, and this offers peace of mind so you can concentrate on other things instead. Second home mortgages are becoming more common, and you can make sure any policy that you have covers all of the mortgages on your home in many cases.
There are some drawbacks to this type of insurance as well though, and for some the drawbacks may outweigh the benefits. Lenders who offer mortgages for people with bad credit will usually advise that you have some type of income protection. While mortgage protection insurance offers a guaranteed acceptance policy you could pay high rates for this insurance, and a disability or other type of policy may be a better and less expensive option. Another drawback is that your premiums will stay the same even though the benefit amount declines over time. A better option for many would be to purchase a life insurance policy which includes the amount of the mortgage as well as other financial needs.
Whether or not mortgage protection insurance is right is an individual decision, and will depend on the specific factors involved in your case. This insurance may be less expensive than other types if you are elderly or have health conditions or other insurance complications, but if you are young and healthy it may be the most expensive option available.