Georgia homeowners pay for insurance that covers a range of property damage risks. MPI or mortgage protection insurance, however, is a different kind of protection that may help when a homeowner is unable to pay their mortgage. While that sort of security may seem beneficial, MPI isn’t right for everyone. Below, homeowners will learn about the basics and benefits of Georgia mortgage protection insurance.
MPI: What Is It?
Mortgage protection insurance works much like disability or life insurance policies do, with monthly costs varying depending on the policyholder’s age, health, and amount of coverage needed. These policies cover only the principal and interest of mortgage payments, which leaves a homeowner to pay other bills like property taxes, HOA fees, and homeowner’s insurance. In some cases, policy riders can be added to cover such costs.
Some MPI policies are intended to help survivors make mortgage payments in the event of a policyholder’s passing. For instance, if a person passes away with a mortgage balance and they have MPI, the insurer pays the lender directly. Then, heirs and partners won’t need to worry about paying the mortgage or losing their home.
Is Georgia Mortgage Protection Insurance the Right Choice?
MPI isn’t needed in every situation, and it’s not always financially feasible to buy such a policy. Georgia homeowners can get comparable coverage through a life insurance policy. To determine coverage needs, homeowners should:
- Add up their outstanding debts, including their children’s college tuition and mortgage balance.
- Deduct the value of any insurance coverage already in place.
If there’s money left over, coverage is sufficient. If there’s a shortfall, however, it may be wise to buy a MPI policy that covers it.
What’s the Difference Between MPI and PMI?
It’s easy to confuse MPI with PMI or private mortgage insurance; the terms are nearly identical, but the coverage is different. While mortgage protection insurance protects homeowners, PMI protects lenders and is required on loans with less than a 20% down payment. To make things even more complicated, there’s MIP or mortgage insurance premium, which is applied to FHA loans. Unlike private mortgage insurance, a borrower cannot remove MIP unless they make a down payment of 10% or more.
Georgia Mortgage Protection Insurance Benefits
Generally, mortgage protection insurance is only recommended for those who can’t afford life insurance or obtain a traditional policy. Here are a few benefits and disadvantages to consider.
- Guaranteed acceptance. There’s no way to be turned down for MPI, which may benefit those who can’t get life insurance.
- Reassurance. The economy is uncertain, and an MPI policy may reassure a nervous borrower that they’ll be covered in the event of job loss.
- Benefits may be limited. If the mortgage is already paid off, buying an MPI policy may not make sense.
- Better alternatives may be available. Because lenders receive MPI payments directly, these policies don’t protect surviving loved ones beyond paying the mortgage.
If MPI is a good fit, a homeowner should compare the costs and benefits of these policies. With help and advice from a local agent, a Georgia property owner will get the information they need to make an informed decision.