Why You Need Mortgage Protection Life Insurance? How to Get a Quote and Buy It.

If you have recently purchased a home, you have likely received calls or information regarding mortgage protection insurance. This insurance policy can help you ensure that your family can remain in your home, even in the event of the unthinkable. So what do you need to know about this type of plan?

What is mortgage protection insurance?

Mortgage protection insurance is term life insurance that can help your loved ones to pay off your mortgage balance in the event of your death. With this type of coverage, you can choose your spouse or another beneficiary to receive the policy’s benefit, leaving your loved ones without needing to continue paying on loan.

For many, this can relieve a tremendous financial obligation if a primary income earner passes away and allow survivors to go on without uprooting their lives at a difficult time.

For many people, the death of a primary income earner means moving away from a home they love because they can no longer afford the payments – but not if you have a mortgage life insurance policy.

It is important to not confuse mortgage life insurance is not the same as private mortgage insurance (PMI), which some lenders require if you have less than a 20% down payment on your home. PMI protects the lender, not the homeowner, in default.

How much does mortgage protection insurance cost per month?

Like any life insurance policy, several criteria can factor into the cost of mortgage protection insurance.

The mortgage protection insurance cost will be determined by your:

  • age
  • gender
  • death benefit
  • your health history
  • smoking status
  • the length of coverage

Because most mortgage insurance policies are term life insurance, the longer your policy’s length (i.e., 30 years versus 20 years), the higher the premium will likely be. The cost will certainly vary from individual to individual based on the criteria listed above.

Customize a Policy:

In addition, today, people can “customize” their life insurance policies to better fit their needs. You can do this type by adding different riders to the policy. While these, too, can add to the cost of your premium, they can often be highly beneficial for you and your loved ones if certain events occur.

Some examples include:

  • Disability Income Rider – This rider will allow for payments to be made if you should become disabled and unable to earn an income for a certain period
  • Return of Premium (ROP) Rider – This rider will refund the premiums paid into the life insurance policy should you survive the entire “term” or duration of the policy.

Another critical factor in the price of your mortgage protection insurance will be the insurance company that you purchase it from. There are a lot of mortgage life insurance companies out there in the marketplace – and similar to purchasing most any other product or service, these insurance carriers all price their offerings in a slightly different manner.

But a quote is just one small factor and a starting point when seeking this type of coverage. You also want to ensure you have the best protection for your needs. That is why working with an independent agent who can help you determine which carrier you will qualify for – as well as the best price – is key. An independent agent can also help you compare several different policies and determine which plan will be the best for you.

This is because the cost can differ – sometimes quite a bit – even for the same type and the amount of coverage. And, considering that you could be paying the premium for this coverage for 30 (or more) years, paying even just $10 or $20 per month more than you need to can add up. Check out this chapter in our buyer’s guide to help you learn how to determine the cost of life insurance.

Example mortgage protection cost:

For example, in 2023, let’s look at a 35-year-old male looking for $250,000 in coverage can start around $21 per month if you can qualify for the best rate class. For example, a Standard rated policyholder would pay between $41.50 and $42.72 monthly, depending on the company. In this case, he would generally be considered to be in “average” health for someone of his gender and age.

However, on the other end of the spectrum, if he was considered to be in excellent health, with an excellent family health history, he could almost cut his monthly rate in half.  This could significantly affect the total amount he would pay in policy premiums – especially over 30 years. Many people do not realize that not all mortgage protection insurance companies will rate their applicants similarly. So, while one carrier might rate this applicant as a Standard, another might rate him as a Preferred – with all other factors being equal. This is why working with an independent agent who can help you shop and compare is essential.

mortgage protection insurance rate chart

What Mortgage Protection Is Not

When obtaining a mortgage, it’s essential to understand what mortgage protection is and is not. This is because many people often confuse this type of coverage with another typical coverage that mortgage companies require if you have less than 20% down on your home. PMI, or private mortgage insurance, is a type of insurance protection that will protect your lender in the case of default by a borrower.

Lenders will require borrowers with low down payments to purchase PMI to protect their financial interests – and it will cost you more each month for the PMI premium. If you have put a down payment of 20% or more on your home, you won’t have to worry about this coverage.

Is PMI required?

No, mortgage protection insurance (MPI) is not required by law. It is optional, and it’s up to the homeowner to decide whether to purchase it.

However, some mortgage loan lenders may require borrowers to have mortgage protection insurance, such as private mortgage insurance (PMI), if the borrower puts down less than 20% of the home’s purchase price. PMI protects the lender, not the borrower, in default. It’s essential to check with your lender to see if MPI is required or recommended.

Mortgage life insurance vs. term life insurance policy

Mortgage protection insurance is a type of insurance policy designed to pay off your mortgage if you die before the mortgage is fully paid. It is a type of term life insurance that provides coverage for a specified period, typically the same length as the term of your mortgage.

The main difference between mortgage protection life insurance and other types of term life insurance is that the benefit amount is specifically designed to cover the outstanding balance of your mortgage. Suppose you pass away during the policy term. In that case, the benefit is paid to your mortgage lender to pay off your remaining balance. It can also be paid out to your beneficiaries to pay off the remaining mortgage balance.

Another difference is that mortgage protection life insurance may be easier to qualify for than traditional life insurance. This is because mortgage protection insurance typically does not require a medical exam or detailed health information.

However, it’s important to note that mortgage protection insurance is generally more expensive than traditional term life insurance, as it is designed to cover a specific debt rather than provide broader coverage for your loved ones.

In summary, mortgage protection insurance is a type of term life insurance that is designed to pay off your mortgage if you pass away before the mortgage is fully paid. It is a specific type of insurance policy that may be easier to qualify for than traditional term life insurance but is typically more expensive.

What to Consider Before You Buy Mortgage Protection Insurance Policy

If you have monthly mortgage payments on your home and want to ensure that your loved ones can continue to reside there, you must provide them with a way to pay off the mortgage debt. We can help you by finding the best mortgage protection insurance.

We work with over 30 different insurance carriers. So we can work with you in finding the policy, the benefits, and the premium that fits your unique situation, even if you have various pre-existing health issues. So, to take the next step in ensuring that your loved ones can remain where they call home now and in the future.