Your Mortgage Protection Insurance Guide

Mortgage Protection Insurance

Learn more about mortgage protection insurance (MPI) and how you can protect your ability to make your mortgage payments. 

Table of Contents

What is Mortgage Protection Insurance?

Mortgage protection insurance covers the principal and interest portions of a mortgage payment in the event the policy holder can no longer make mortgage payments. Instead of providing funds that can be used for any expenses, mortgage protection insurance is paid directly to the mortgage lender.

Mortgage protection insurance is similar to life insurance, in that it is paid out after one’s passing. However, the way the insurance proceeds are used differ.

With this type of insurance, the proceeds are sent directly to the mortgage lender, not to the insured homeowner.

The insurance policy doesn’t only cover the death of the homeowner. If a homeowner becomes disabled and cannot work, the insurance may cover the mortgage and interest payments.

Depending on the policy, it may also help cover mortgage payments for job loss or other life events. These differences are referred to as riders.

How Does Mortgage Protection Insurance Work?

Once a mortgage protection policy is obtained, the homeowner makes monthly payments to cover the insurance premium.

Instead of the homeowner choosing the beneficiary, the mortgage lender is the default beneficiary. Over time, the amount that may be paid out decreases, since the mortgage decreases as principal payments are made.

If the homeowner dies, the remainder of the mortgage will be paid directly to the lender. If the homeowner suffers a covered injury or another event, the insurance will cover the mortgage payments for a specified amount of time.

1. Get a Quote

The first step is to get a quote for mortgage life insurance. Anyone is able to apply for MPI. The monthly premium, however, will depend on the applicant's age, income, mortgage, and other mitigating factors.

2. Choose a Policy

Policies will differ for many reasons, including price, coverage, riders, and eligibility. Once you find the policy that best suits you, it is best to lock down the policy before any health or income factors change and effect your monthly premium.

3. Get Peace of Mind

Whether the mortgage protection insurance is to cover yourself or a loved one, rest assured knowing that their ability to pay for their mortgage is protected. Due to the uncertainty of a life event, the ability to afford home payments is crucial.

How Much Does Mortgage Protection Insurance Cost?

The monthly insurance premium for a mortgage protection policy can range from $5 per month to $500 per month, depending on term length, policy amount, and health factors. The average cost of a $250,000 MPI policy is about $50 per month. 

If the policy holder is in poor health, works in a dangerous field of employment, or smokes, then the monthly premium will increase. 

Generally speaking, the cost of MPI changes depending on the age of the applicant, the amount of coverage, and the coverage term. 

To determine how much you’ll have to pay, check out our mortgage protection insurance calculator

How long is the term for MPI?

The term length of a mortgage protection insurance policy generally matches the length of the mortgage being insured. If the policy holder has a 30 year mortgage, than the MPI policy will also be for 30 years.

It can also be limited by the homeowner’s age, as older buyers are more likely to experience a covered event compared to younger buyers. 

Since an MPI policy is not required, it can be canceled at any time. Homeowners may prefer to cancel it to save money once they have a significant amount of equity in their home.

How much coverage do MPI policies offer?

Mortgage protection insurance policies can range anywhere from $5,000 to $2,000,000+ depending on the size of the mortgage being covered.

If only a small mortgage is being covered, or the mortgage in nearly paid off, then an applicant will only require a small MPI policy. But if the applicant needs to insure a brand new mortgage or cover an expensive home, then the size of the policy will be much larger.

Regardless of the amount of coverage the policy has once it begins, all mortgage protection policies decrease over time. As the mortgage is paid down, the amount of mortgage insurance coverage decreases as well. This ensures no excess funds are paid out by the insurance company. 

Is Mortgage Protection Insurance Required?

Mortgage protection insurance is not required to purchase or own a home. However, it may prove beneficial depending on the homeowner’s personal situation. 

Private mortgage insurance, which is different, may be required by the lender. However, MPI is something that the buyer can choose to purchase if they want to protect their ability to afford mortgage payments.

What are MPI Riders?

Insurance riders, otherwise known as a floater, is an optional add-on to an insurance policy. These are meant to provide various types of benefits to a policy holder, depending on the rider. Different types of insurance will have different types of riders due to the nature of the payout and policy. 

When it comes to mortgage protection insurance policies, there are many different riders available. Given the similarity to life insurance, MPI will feature the option for riders that change when or how a policy payout is received or initiated.

With mortgage protection insurance, riders come into play when the applicant wishes to have additional coverage included in the policy. This coverage can include life events outside of death that might impact one’s ability to pay their mortgage.

Types of Riders

Critical Illness Rider

With this rider added on, a lump sum payment can be made according to the amount purchased if the homeowner is diagnosed with an illness covered by the rider.

The suggested amount is 12 to 24 months’ worth of mortgage payments, but homeowners can purchase up to 100% of the mortgage amount in case it is needed.

Unemployment Rider

Buyers may wish to add on the unemployment rider if it’s not already included in the policy. This covers the buyer if they lose their job involuntarily, as long as the reason for this is covered by the policy.

There may be a waiting period before coverage begins for this rider, but once it does start, it can cover up to six months of mortgage payments while the homeowner looks for a new job.

Return of Premium Rider

Some MPI companies will offer a rider that enables the buyer to receive a refund for all premium payments. Applicable fees can be deducted from this when it is used.

This can only be used once the policy term has ended and may not be able to be obtained if the mortgage was used for unemployment, illness, or other temporary reasons before the policy’s end.

Accelerated Access Rider

Although uncommon in mortgage protection plans, accelerated access is a type of rider that provides benefit before death. Examples include being diagnosed with a chronic illness or critical injury that makes paying a mortgage impossible.

Disability Rider

If a policy holder becomes disabled and is unable to continue making mortgage payments, then a disability rider will be helpful. If your line of work is risky or your genetics have lead to disabilities, consider this rider.

Overloan Protection Rider

Overloan protection ensures that excessive loans or mortgages cannot be made against the mortgaged property. 

Primary Insured Rider

This insurance rider provides added benefit to the primary policyholder, in addition to that of the mortgage protection. This will usually come in the form of a life insurance policy. 

Additional Insured Rider

Similar to the primary insured rider, this provides added benefit coverage to additional household members not included in the mortgage protection plan. 

Children’s Insurance Rider

Another add-on for mortgage protection insurance can include a benefit for children who live in the originally-protected household, in the form of a life insurance policy.

Accidental Death Benefit Rider

While a natural or illness-caused death is already covered in a mortgage life insurance plan, accidental death may not. This accidental death rider protects the mortgage in the event the policy holder dies via an accident.

Waiver of Premium/Monthly Deductions Rider

In the event the insured party becomes incapacitated and unable to pay their mortgage before the age of 65, it is possible to receive a waiver of premium payments or monthly deductions.

Do I Need MPI Riders?

Depending on your health and financial situation, an add-on rider to your mortgage protection insurance plan may be beneficial. Riders even exist to cover the risk of bankruptcy.

There are many options available to supplement your MPI, and depending on your needs, a certain rider may protect you from risks that you weren’t aware of. 

By getting a free mortgage protection insurance quote, you can find out which policy and riders are best for you.

Is Mortgage Protection Insurance the same as Life Insurance?

While mortgage protection insurance is technically a form of life insurance, the major difference is with MPI the policy holder cannot choose the beneficiary. The beneficiary of an MPI policy will always be the mortgage lender.

Since the MPI reduces in value as the mortgage is paid off, there will not be any excess funds to be retained by the family. 

Unlike many life insurance policies, MPI policies have guaranteed acceptance. This means applicants will not be turned down for a policy because there is no underwriting process with MPI.

The cost can vary based on the homeowner’s health or occupation, but just about anyone can obtain a policy. This means that MPI can be more expensive than life insurance for the same amount of funds.

There are also differences in the rules and regulations. With life insurance, the balance on the policy stays the same over time, while it lowers for an MPI policy as the mortgage is paid off. On top of this, there may be limits on when the policy must be purchased, usually within two years of buying the home. Life insurance, on the other hand, can be purchased at any time.

Who sells mortgage protection insurance?

MPI can be purchased from a mortgage lender, a private insurance company, or through a life insurance provider. Not all insurance companies offer this type of insurance, as it is frequently rolled into a full life insurance policy.

MPI providers that we review include AIG, Allstate, Americo, Athene Annuity, Foresters Financial, Geico, Global Atlantic, John Hancock, Mutual of Omaha, Royal Neighbors of America, State Farm, and Transamerica.

What's the difference between MPI and PMI?

PMI, or private mortgage insurance, is similar to MPI in that it insures the ability to pay the mortgage. Otherwise, they are vastly different.

The main difference is that PMI can be required by the lender. This type of policy is required on most loans if the home buyer uses a down payment of less than the standard 20%. MPI insurance can be canceled at any time, but PMI insurance can only be canceled once the equity in the home reaches 20% or higher.

MPI on the other hand is completely optional and is not determined on the amount of equity in a home. Rather, an MPI policy is based on the balance of the mortgage.

Is mortgage protection insurance a good idea?

If there is any concern that you or a loved one may become unable to afford their mortgage payments, then a MPI policy can be an affordable reassurance.  Since MPI proceeds are paid directly to the lender, the policy can be effective for ensuring the funds are used properly and for good use.

It is important for homebuyers to compare income and assets to any debts they might have to determine if they’ll need this type of coverage. Using the MPI calculator can help you determine if a policy is right for you.

Where can I get mortgage protection insurance?

MPI can be purchased in any of the following states:

  • Alabama
  • Alaska
  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Vermont
  • Virginia
  • Washington
  • West Virginia
  • Wisconsin
  • Wyoming

Mortgage Protection Insurance Calculator

The cost of mortgage protection insurance can change for many reasons. The more likely you are to need a payout, the more expensive your insurance premiums will be. Factors that increase this likelihood are advanced age and health issues, to name a few. 

When a mortgage protection insurance agent calculates your policy with an actuary, thousands of factors will be applied. As the applicant, you can only control so many of the factors that will determine your premium costs. Other factors, such as location, gender, and genetics will impact your insurance cost that are out of your control.

If you determine that you need an add-on to your policy such as an insurance rider, your costs will increase as well. Riders such as accidental death, unemployment, disability, or bankruptcy will provide extra protections, but ultimately increase your monthly premium as well. 

Mortgage Protection Plan Reviews

AIG Mortgage Protection Insurance

Policy Name: Guaranteed Whole Issue Life Insurance

Policy Cost: Starting at $20/month

Policy Coverage: $5,000 – $25,000

Our Review: AIG, otherwise known as American International Group, was founded in 1919. AIG offers a wide range of insurance products including mortgage protection insurance. Customers can apply for an entire life insurance policy, such as the AIG final expense insurance, or simply get mortgage protection through the Guaranteed Whole Issue Life Insurance.

Americo Mortgage Protection Insurance

Policy Name: Mortgage Protection Life Insurance

Policy Cost: N/A

Policy Coverage: $25,000 – $400,000

Our Review: Founded in 1946, Americo is the insurance subsidiary of the company Americo Financial Life And Annuity Insurance Company, Incorporated. They specialize in term, universal, and whole life insurance products. Americo mortgage protection insurance comes with many benefits, including online applications, instant underwriting, and possible cash back options. Americo also offers MPI living benefit riders such as critical illness, chronic illness, and terminal illness.

Allstate Mortgage Protection Insurance

Policy Name: Mortgage Life Insurance

Policy Cost: N/A

Policy Coverage: $25,000+

Our Review: The Allstate Corporation was founded in 1931 as part of the company Sears, Roebuck, and Co. In 1993, Allstate was spun off into its own company offering a wide range of insurance products. Allstate offers mortgage life insurance through its life insurance program which includes multiple insurance rider options.

Athene Annuity Mortgage Protection Insurance

Policy Name: Mortgage Protection Insurance

Policy Cost: N/A

Policy Coverage: N/A

Our Review: Athene Annuity and Life Company was founded in 1896. They offer annuity and insurance products across all fifty states. Athene Annuity products must be purchased through a licensed insurance provider. 

Foresters Financial Mortgage Protection Insurance

Policy Name: Mortgage Protection Insurance

Policy Cost: Starting at $10/month

Policy Coverage: N/A

Our Review: Foresters Financial has been offering insurance services for over 150 years. Foresters Financial Mortgage Insurance covers mortgage payments in the event of an unexpected death, critical illness, terminal illness, or permanent disability. Their MPI can also be a single or joint with a decreasing term.

Geico Mortgage Protection Insurance

Policy Name: Mortgage Insurance

Policy Cost: Starting at $10/month

Policy Coverage: N/A

Our Review: GEICO, originally known as Government Employees Insurance Company, was founded in 1936. Famous for their gecko spokesperson and interesting commercials, GEICO offers many types of insurance beyond auto insurance. Their mortgage protection policy is offered through third party insurers and comes with all of the features of your average insurance policy.

Global Atlantic Mortgage Protection Insurance

Policy Name: Global Atlantic Life Insurance

Policy Cost: N/A

Policy Coverage: N/A

Our Review: Global Atlantic offers annuity and life insurance products. As part of their Life Insurance policy, policy holders can protect their mortgage payments in the event of an unforeseen life event. Furthermore, Global Atlantic offers nearly a dozen different riders to supplement their policy, including a terminal illness rider or even a waiver of monthly deductions rider.

John Hancock Mortgage Protection Insurance

Policy Name: John Hancock Vitality Program

Policy Cost: N/A

Policy Coverage: N/A

Our Review: John Hancock offers both term and whole life insurance policies through licensed insurance brokers. They offer mortgage protection insurance through their life insurance offerings that help your surviving family pay your mortgage in the event of an unexpected loss.

Mutual of Omaha Mortgage Protection Insurance

Policy Name: Mutual of Omaha Mortgage Protection Insurance

Policy Cost: N/A

Policy Coverage: Up to $40,000

Our Review: Founded in 1909, Mutual of Omaha offers a wide array of insurance products. As Mutual of Omaha’s mortgage insurance offerings, policy options are for term life insurance, whole life insurance, or guaranteed issue. Anyone who is 85 years old or younger can receive mortgage protection insurance from Mutual of Omaha.

Royal Neighbors of America Mortgage Protection Insurance

Policy Name: Royal Neighbors Whole Life / Term Life

Policy Cost: N/A

Policy Coverage: N/A

Our Review: With four life insurance offerings, Royal Neighbors of America can offer mortgage protection in a number of ways. Royal Neighbors offers whole and term life insurance policies which can protect the mortgage payments of you or a loved one.

State Farm Mortgage Protection Insurance

Policy Name: Mortgage Life Insurance

Policy Cost: N/A

Policy Coverage: N/A

Our Review: State Farm is the largest provider of auto insurance in the United States. Their mortgage protection insurance is offered through their life insurance offering and includes riders for unemployment, accidental death, and more.

Transamerica Mortgage Protection Insurance

Policy Name: Transamerica Mortgage Protection Insurance

Policy Cost: N/A

Policy Coverage: N/A

Our Review: Through its insurance broker partners, Transamerica offers mortgage protection life insurance policies across the United States.