Custom Search

Mortgage Insurance

Mortgage insurance can seem to add a lot to the cost off your monthly bills. The real question that arises though is, could you afford to pay your mortgage if you lost your job or were too ill or had an accident at work?.

Maybe some people could for a short time, but it is likely that it will put a considerable strain on your finances. Mortgage Insurance will also cover you and your family if you should become terminally ill.

Mortgage insurance, which is also known as mortgage protection and mortgage life insurance, is term life insurance that will help shield the homeowners family members in the sad case he or she should pass away.

Mortgage Insurance Or MPPI

Mortgage Payment Protection Insurance (MPPI) will cover your monthly mortgage payments for a specified period if you should suffer accident, sickness, or unemployment. This a real safeguard for most people as you just never really know when something may go wrong.

Interestingly Mortgage Insurance became tax-deductible in 2007 in the USA.

Mortgage Insurance Premiums

If you do your research and take out the right policy you can pay a fixed monthly premium and can then relax knowing your insurance company will hand over enough cash for you to meet your mortgage repayments and possibly a little bit extra as well if you should ever need to claim.

As with any insurance policy, you pay a premium each month towards your mortgage insurance and, if the worst happens, the policy will start to pay out after the usual excess period.

The average costs of mortgage insurance premiums vary, but typically they fall between one half and one percent of the loan amount, depending on the size of the down payment and loan specifics.

What Is MPPI?

Mortgage Payment Protection Insurance (MPPI) will pay your monthly mortgage payments only for a specified period of time if you suffer an accident, sickness, or unemployment.

Lenders and insurers have got together and agreed to adopt certain minimum standards for MPPI, so you can be confident that the level of cover you will be offered meets or exceeds these standards.

How Does MPPI Work?

In return for a premium each month while the mortgage is running. Should you become unemployed, or unable to work due to accident or sickness, the policy will start to pay out (usually it goes direct to your lender) and make your mortgage payments for you.

To keep the cost of the insurance down to acceptable levels, there are some periods where you will not be covered (you really should check each individual policy for the exact details). The main ones are an "exclusion period" of up to 60 days when you first take out your policy, during which any claim for unemployment would not be met (although claims for accident or sickness would normally be paid). In addition, there is an excess or waiting period of up to 60 days for each claim, during which time no payments will be made.

So it does makes sense to try to keep enough money in savings to cover two months worth of mortgage payments, even if you have MPPI.

There are some circumstances when MPPI will not cover you as an example, unemployment caused by misconduct, or that you knew was impending at the time you took out the insurance, or sickness claims caused by certain pre-existing medical conditions.

Joint Mortgage Payment Protection Insurance

The MPPI can be set up so that it will cover both of you, usually by allocating some proportion of the MPPI to each person (for example 50/50 or 60/40). If one person needs to claim, then the amount of the benefit payment will be in proportion to the MPPI that is allocated to that particular person.

It is also possible to allocate the MPPI on a 100/100 basis, that means that 100% of the MPPI is paid, even if only one of the joint borrowers loses their income. This type of arrangement does generally require much higher premiums.

You will need to do your research and ask the correct questions, this will give you all available options, to make an informed decision.