Mortgage Protection Insurance (MPI) can be of high value for homeowners, guaranteeing that your mortgage will be paid if you pass away unexpectedly. But with several coverage options and costs, it’s important to understand the details before purchasing a policy. Here are five essential tips for buying MPI insurance and making the most of your coverage.
People who usually benefit from MPI:
- New homeowners with large mortgage balances
- Families with a single primary income earner
- Homebuyers without other life insurance
- Individuals with health concerns
- Couples who want mortgage-specific coverage
1. Understand How Mortgage Protection Insurance Works
MPI can refer to traditional term life insurance or credit insurance. With term life insurance, you take out a policy with a death benefit that your beneficiaries can use to pay off the mortgage or other expenses as they see fit. This approach offers flexibility and can often be more affordable than credit insurance. On the other hand, credit insurance is typically offered by lenders and directly covers the mortgage, sending any payout directly to the lender. Credit insurance tends to be more expensive and restrictive, which is why it has been falling out of favor.
Why term life? Traditional term life insurance allows your family to have more control over the funds, using them as needed.
The upside to credit insurance would be that the coverage automatically lowers with the decreasing balance of your mortgage. However, it is often the case that the monthly premium will stay the same, even as the coverage decreases. At Everyday Life, we use a strategy called term laddering to build a traditional term life policy where both coverage and cost decrease in line with your mortgage balance. Learn more about term laddering.
2. Consider the Cost of Each Option
In general, term life insurance is more affordable than credit insurance for the same coverage amount. Credit insurance often includes a simplified underwriting process, which may raise costs, while traditional term life policies generally have lower premiums with flexible coverage.
For example, Everyday Life Insurance offers term life policies starting at just $4 per month, making it easy to find budget-friendly, mortgage-protective coverage. By opting for a term policy over credit insurance, you get the financial benefit of lower costs and the flexibility to apply the payout toward any other financial need.
3. Evaluate Your Existing Life Insurance Coverage
If you already have a life insurance policy, take a look at how much coverage it provides relative to your mortgage balance. If your current policy has a high enough death benefit, you may not need additional protection.
However, if your existing life insurance is insufficient, consider increasing your coverage or shopping for a new plan to see what offers might be available.
4. Shop Around for the Best Policy
Not all MPI policies are created equal. Rates and coverage options vary between providers, so it’s important to compare policies before making a decision. People usually purchase MPI insurance through a bank, lender, or private insurance company.
Whether or not you choose to talk to our team, we highly recommend you work with an independent insurance agency. This is generally going to provide you with the best quote comparisons and unbiased expertise.
Because they aren’t tied to a specific provider, independent agents can often secure lower premiums and more flexible terms. Additionally, independent agencies can help you evaluate whether term life insurance or credit insurance is best for your situation, rather than steering you toward a one-size-fits-all option.
Try Our Online MPI Insurance Calculator
By understanding how MPI works, evaluating its costs, and comparing it to other options, you can find the best policy for your needs. Whether you have never had a life insurance policy or are a new homeowner looking for coverage, we encourage you to try our online calculator. It’s free, totally anonymous, and doesn’t even require an email address. See what offers are available to you today.
