Florida Mortgage Protection Insurance
The idea behind Florida mortgage protection insurance (MPI) is simple. You as a homeowner experience a health issue and become disabled, or a long period of unemployment. The mortgage payments will be made. Or worse, you die, this type of policy can pay off the balance of the mortgage.
MPI is often confused with PMI (private mortgage insurance). PMI protects the lender from financial loss, not you! Also, MPI is not required for loan approval.
Mortgage Protection Insurance Pros
In my opinion, there are only three reasons for getting mortgage protection insurance.
- If you have health problems, this type of policy is usually issued on a guaranteed basis.
- You work in a high-risk profession, so you find it hard to get disability insurance. MPI would give you the coverage needed if because of injury, illness or death – you can’t make mortgage payments.
- Or you might want it because it pays off the mortgage directly, rather than paying proceeds to beneficiaries.
Cons of Mortgage Protection Insurance
- MPI prices vary a great deal and it can be hard to get price quotes online.
- The MPI is paid directly to your lender.
- Term life insurance with a disability policy is usually cheaper and provides more comprehensive coverage.
- If you have an equity line on your home, only the original mortgage amount is covered.
- Planning on paying off your mortgage early? On most MPI policies the loan payoff amount decreases as the mortgage is paid down. (There are newer MPI that offer a level-death benefit.)
I don’t sell MPI to my clients. There are much more efficient and cheaper ways to protect yourself.
Instead, I use an enhanced DIME method (debt, income, mortgage, education). It factors in the amount of a mortgage in choosing how much term life insurance you need.