Whenever you decide to take out a new mortgage, you’ll be offered mortgage protection insurance (MPI). There are several variations of this insurance available, but in general it is used to protect your loan payments in the event you lose your job, have sudden unexpected medical bills or experience a life-changing disability.
But is mortgage insurance actually worth it, or is it just another way for the mortgage company to get more money out of you? The answer primarily depends on your age, health and financial situation. Here’s some information from a realtor in Alpine, TX about whether mortgage insurance is right for you.
Benefits of mortgage protection insurance
Perhaps the most valuable benefit of MPI is that it is handed out on a “guaranteed acceptance” basis. There are very few, if any, questions on an application for MPI that will prevent you from getting the coverage you need, which is especially important for people who have health issues and who often have problems getting other kinds of insurance at a reasonable rate.
If you are someone who works in a high-risk occupation, this is also another way for you to protect your investment and your estate. People in the construction industry, for example, are more susceptible to injury and death on the job, and often have a hard time getting disability insurance. Mortgage protection insurance is an easier policy to get that will provide you with some protection for your home.
Drawbacks of mortgage protection insurance
If you already own your home outright, then MPI doesn’t do anything for you.
In other circumstances, keep in mind that MPI is a declining-benefit policy. You’ll pay a set premium for the entire life of the mortgage, but the payoff amount decreases as you continue to make your mortgage payments.
In addition, it might not always be the best decision to pay off most of your mortgage in the event of your death. Depending on the monthly amount of the mortgage payments, it might make more sense for you to leave behind lump sums to your beneficiaries and allow that money to collect interest while continuing to make the mortgage payments as outlined in your original loan agreement.
If you do decide to go with MPI, make sure you have a plan for how you’ll choose your policy. You shouldn’t automatically go through the same bank or lender providing your mortgage—you should do some shopping around to make sure you can get the best available rates and benefits.
There are also some alternative options you can choose. For example, if you’re considering an MPI plan that would be payable upon your death, you might consider a life insurance policy instead, as the policy would not decline in value over time and would, depending on the value of the policy, cover more than just your mortgage in the event of your death.
For more information about mortgage protection insurance, contact Carpenter Real Estate to speak with an experienced and knowledgeable realtor in Alpine, TX.