What is mortgage protection insurance and how is it different from regular life insurance?
Answered by 4 licensed agents
There is no difference it is the same it is called mortgage protection because the main goal of purchasing the policy is to payoff the mortgage. These are just normal term policies although some may have some extra living benefits to them.
Mortgage protection insurance is not different from regular life insurance in that it provides a death benefit. Mortgage protection is a term life policy, usually for the amount of the mortgage, that will provide a benefit should the insured die, thus allowing the mortgage to be paid off.
Some MP policies will have a decreasing death benefit as the mortgage is paid down respectively, though the premiums will normally remain the same. Some policyowners prefer a regular term plan with a benefit to cover their mortgage payments, knowing that as the loan is paid down, their beneficiaries will use the difference for necessities like burial, school, medical bills, anything at all.
Original Mortgage Protection is not available any longer. It was promoted by banks that would pay off the balance remaining on the loan, the lender was the beneficiary and the loan gets paid upon the borrowers death. Those plans were not transferable. Those plans are no longer available. Today mortgage protection can be had by getting a term life for the length of the loan if available or if preferred and the beneficiary would be the homeowner and upon the individuals death the proceeds are paid to the beneficiary, typically a spouse and the survivor pays the loan. The face amount never decreases and it is portable.
Mortgage protection insurance will guarantee that your remaining mortgage balance is paid off when you pass away but the price per dollar of coverage is much higher than traditional life insurance. If you have at least average health, it's in your best interest to apply for regular life insurance to check your rates. In addition, if you get term life insurance then your coverage will be the same for that term length. With mortgage protection insurance your coverage decreases as you pay off the mortgage.
