Mortgage protection insurance (MPI) is a type of life insurance designed to pay off your mortgage if you pass away or, in some cases, become seriously disabled or lose your job. While it’s not required like homeowners insurance or private mortgage insurance (PMI), it can offer peace of mind to homeowners who want to ensure their family won’t lose the home if something happens to them.

Understanding mortgage protection insurance

Mortgage protection insurance, often shortened to MPI, is a specialized insurance product meant to cover your remaining mortgage balance if you die before it’s paid off. Some policies also cover disability or job loss, depending on the provider. 

This kind of coverage is commonly offered by insurance companies, lenders, and third-party affiliates, often around the time you’re closing on your home.

The main goal? To help your family stay in the home without having to worry about making mortgage payments in the wake of a tragedy. It’s a type of financial safety net for homeowners who want extra security beyond standard life or disability insurance.

How does mortgage protection insurance work?

When you purchase an MPI policy, it’s typically tied to the remaining balance and term of your mortgage. If you pass away during that term, the insurer pays your lender directly — not your family — the outstanding balance on your loan. This ensures that the house is paid off and your loved ones can remain in it without taking over the mortgage.

Some MPI policies also come with:

• Disability coverage that pays your mortgage temporarily if you’re unable to work
• Unemployment protection that covers payments for a limited time if you lose your job
  
  

It’s important to read the fine print. These features often come with strict eligibility rules, waiting periods, or time limits on coverage.

Mortgage protection insurance vs. private mortgage insurance (PMI)

Many homeowners confuse MPI with private mortgage insurance, but they serve completely different purposes.

Private mortgage insurance (PMI):

• Required by lenders when your down payment is less than 20%
• Protects the lender, not you, in case you default on the loan (i.e., stop repaying it)
• Doesn’t pay off your mortgage balance — just reimburses the lender for losses

Mortgage protection insurance (MPI):

• Optional, and typically purchased by you
• Protects you and your family by paying off the mortgage if something happens
• Can also offer job loss or disability coverage, depending on the plan

Understanding the difference between these two types of insurance can help you make smarter decisions about what kind of protection you truly need.

Who should consider mortgage protection insurance?

Mortgage protection insurance isn’t for everyone, but it can be a helpful product for certain homeowners. Consider MPI if:

• You have dependents who rely on your income to cover housing costs
• You don’t have enough life insurance or disability insurance to cover your mortgage
• You’ve recently taken on a large mortgage and want extra financial backup
• You or your partner have a health condition that would make life insurance more expensive

It’s especially appealing to younger homeowners who want coverage but may not qualify for traditional life insurance due to health reasons or work-related risks.

Pros and cons of mortgage protection insurance

Like any financial product, mortgage protection insurance comes with advantages and drawbacks.

Pros:

• Easy approval: Many policies require no medical exam
• Guaranteed payout to the lender to cover your mortgage
• Peace of mind for your loved ones if you pass away or become disabled
• Optional add-ons for job loss or critical illness

Cons:

• The payout amount declines as your mortgage balance shrinks
• The benefit goes straight to the lender, not your family
• MPI can be more expensive than term life insurance for similar coverage
• Job loss and disability riders often come with exclusions or caps

Before purchasing MPI, compare the cost and coverage against other types of insurance, like a term life policy that could pay your family directly and be used for multiple expenses — not just the mortgage.

How much does mortgage protection insurance cost?

The cost of mortgage protection insurance depends on a few key factors, including:

• Your age and health
• The size and term of your mortgage
• Whether you include disability or job loss protection
• The insurance provider

On average, MPI costs between $30 and $150 per month, but it could be higher if you’re older or have health issues. 

It’s also important to note that most policies are “guaranteed issue,” meaning they don’t require a health exam. That convenience comes with a higher premium.

Some lenders may offer MPI bundled with your mortgage, but it’s usually better to shop around with independent providers to compare rates and coverage options.

Is mortgage protection insurance worth it?

Whether MPI is worth it depends on your personal financial situation. For some, it’s an ideal form of backup protection. For others, term life insurance may provide broader, more flexible coverage at a better price.

Ask yourself:

• Do I already have a life insurance policy that would cover the mortgage?
• Would my family struggle to make payments without my income?
• Do I want the benefit to go only toward the mortgage, or do I want to give my family options?
• Can I qualify for better or cheaper insurance elsewhere?

If your goal is to ensure your family can stay in the home no matter what, MPI offers one direct and effective solution. But if you want more control over how your death benefit is used, term life insurance might be a better fit.

Where to get mortgage protection insurance

You can get MPI through:

• Major life insurance providers
• Mortgage lenders (though often with limited options)
• Credit unions and banks
• Online insurance brokers

Always compare multiple quotes, check the reputation of the insurer, and read the policy details carefully. Pay attention to exclusions, coverage limits, and whether the policy includes disability or unemployment protection.

Want to protect your mortgage and your family?

Mortgage protection insurance isn’t required, but it can provide valuable peace of mind — especially if you’re the primary income earner and want to ensure your home stays in the family no matter what. While it might not be the right fit for everyone, it’s worth considering as part of a broader financial safety plan.

Before making a decision, compare MPI with other options like term life or disability insurance. While you’re at it, make sure you’re comparing mortgage rates, too. Even a slightly better rate can save you and your family thousands, making your home more affordable for your loved ones if they’re left without you. To compare mortgage rates today, use our handy rate tables. 

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