The Basics of Mortgage Protection

There are a lot of misconceptions about exactly what Mortgage Protection Insurance (MPI), how it works, and who it’s for. In today’s article, we’re going to answer those questions and cover the basic of this type of insurance so you can determine if it might be right for you.

What is mortgage protection insurance?

Mortgage Protection Insurance (MPI), also sometimes called Mortgage Protection Life Insurance is a policy designed to payoff the balance of the mortgage, a portion of the mortgage, or at minimum help your family continue to make monthly mortgage payments if you (the policy owner and mortgage borrower) die prior to the note being paid.

Some policies do not necessarily require the insured to pass away in order for a benefit to be paid as some policies will do so if the insured is diagnosed with a chronic, critical, or terminal illness.  This would depend on the specific policy and how it’s structured (much more on this in the “Types of MPI Products and Policies” section below).

Why do people typically put this type of coverage in place?

Most people put MPI in place to alleviate the financial burden their partner (or family) would face in the event of their passing.  Many families rely on multiple incomes and if one of those incomes were lost, the financial hardship that would result could be devastating.  

MPI is a way to prevent that financial hardship and provide security to your family, god forbid the unthinkable happens.  It gives your partner and family options and can allow them to maintain their current standard of living and not have to make any rash financial decisions while going through an incredibly difficult time emotionally.

In order to determine if this type of coverage would make sense for you and your family, it’s best to consider your unique “personal variables”(don’t worry, we walk you through them in detail shortly) and then evaluate what things would look like financially if something were to happen to you (and/or your partner)…

Listen, I get that this can be an uncomfortable exercise to go through.  I understand it can be difficult to think about our own mortality and/or a loved one not being here…

However, getting clarity as to what the financial landscape would look like for your family should something happen is the only way to determine if MPI would make sense for you. 

Now, I’m willing to bet that the idea of protecting your loved ones and putting them in a position where they are 100% debt free with the house paid for if something were to happen to you is much more appealing to you than leaving them in a financial bind and stressed about how they’re going come up with the money to pay the mortgage and keep the house…

The concept of MPI and what it does makes sense to just about everyone. So naturally, one of your  BIGGEST QUESTIONS probably is …

How much does Mortgage Protection Insurance cost?

The answer is…

It depends.

The #1 question I get asked when speaking to folks about MPI is “Can you give me a quote?”

The problem is there are many variables that impact how much someone will pay… 

And most people shopping around getting “quotes” for MPI either don’t understand ALL the variables, lack proper context or information on the quote they’re getting, or both… 

As a result, they believe the quotes they are  comparing are  “apple to apples” when in many cases they are unknowingly comparing “apples to oranges” or worse, “apples to chicken”. 

In order to answer your most pressing question… and get you a quote that is relevant and useful, we must provide a bit of context and unpack “The Great Quote Fallacy.