Mortgage protection insurance can be an attractive option for homeowners looking to protect their investment and keep family members from financial troubles. This type of insurance policy covers your remaining home loan balance if you die.
If you die before your mortgage is fully paid off, your heir or heirs will need to assume the payments if they want to keep the home. In the event they are unable to meet the payments, the loan will go into default. If it continues to go unpaid, the bank will foreclose and take possession of the property.
Mortgage protection insurance, or MPI, can prevent such an event. If you have this policy, the insurance company will typically pay the lender the remaining mortgage balance after your death. Some MPI policies will also pay out to the lender for a specific period of time if you become unemployed or disabled, so there is no interruption of payments.
For a homeowner who is concerned about something happening to them and they have dependents, MPI can be beneficial, as it can give the policy owner and his/her dependents an extra layer of protection.
As the MPI policy holder, you would pay your premiums over a specific term. During that time, you are covered. The benefit from this kind of insurance is generally decreasing, meaning the possible payout goes down over time. As you pay off more of your mortgage, there is less loan for your insurance to cover.
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