What is Mortgage Protection Insurance When Buying a House?
When we complete a pile of formalities and buy a beloved house, we are usually the "owners" of the mortgage. In this process, we will inevitably encounter the problem of mortgage protection insurance, or home loan life insurance. What exactly is this insurance? What is the use? What is the difference with traditional term life insurance? Is it compulsory to buy by law? How to choose?
What is mortgage protection insurance?
Usually when we buy a house or after we buy a house, the bank or the borrowing financial institution will make an offer to buy mortgage loan insurance. If we just bought a house or did a refinance, our mailbox may have received a lot of mortgage loan insurance announcements. Before making a purchase decision, we need to understand what it is all about.
Mortgage protection insurance, abbreviated as MPI, is an application of term life insurance.
It only provides protection for the monthly housing loan payable. When you die unfortunately, the death benefit guarantees that you will continue to pay the mortgage, so that the family will not have to sell the house and lose their place of residence.
The beneficiaries of these common insurance policies are the financial institutions that borrow money and, upon your death, the financial institution will receive a claim from an insurance company. It is generally believed that mortgage protection insurance is more inclined to protect financial institutions that borrow money.
What is the difference between MPI and PMI when buying a home
MPI is completely different from PMI (Private Mortgage Insurance).
PMI insurance is when we are unable to pay the down payment (usually 20%), in order to cope with the risk, the person who loaned us the money asks us to buy it.
The MPI is to solve the problem of whether we can continue to pay off the mortgage every month after losing our ability to earn an income.
Therefore, MPI is not included in the PMI (Private Life Mortgage Life Insurance) when buying a house.
Is mortgage protection insurance required by law?
No.
What is the difference between mortgage protection insurance and term life insurance?
Mortgage protection insurance is an application of term life insurance, it is "consumer goods" in nature and has the same operating mechanism.
After purchasing these two types of insurance, we choose the number of years to protect and then pay the premium each month. When the "trigger compensation condition" occurs, the claim will be paid to the beneficiary.
However, mortgage loan insurance and term life insurance are still very different:
The purpose of mortgage protection insurance is a "loan" and the claim can only be used to repay the designated home. And the object of protection of term life insurance is all of your potential risks. Claims can be freely controlled and can be used to include, but not limited to, loan repayment, and can also be used to repay loans to other properties.
Mortgage protection insurance beneficiaries are financial institutions that borrow money and term life insurance beneficiaries are determined by us.
Mortgage protection insurance is generally a term life insurance policy with decreasing denominations, and the premium for term life insurance can be kept stable.
Mortgage insurance is generally more expensive than an ordinary life insurance policy, since it is generally not subject to medical examinations and its issue is guaranteed. Ordinary life insurance may require a medical examination, and if the state of health does not comply with the standard, insurance may be refused.
Home insurance term life insurance guaranteed life insurance object loan risk all risk beneficiaries financial institutions themselves remuneration is reduced from year to year
Should I buy mortgage protection insurance or term life insurance?
For most families who buy a home, term life insurance is a better option than mortgage protection insurance. The reason is:
Term life insurance provides not only protection for housing loans, but your beneficiaries can use compensation to pay for children’s tuition, living expenses, etc. In general, term life insurance provides greater flexibility.
We can choose the font size. Mortgage protection insurance protects the risk share of financial institutions. Therefore, the insurance coverage of these policies is strictly limited to the loan amount.
We can choose the length of the police protection period. Mortgage protection insurance is usually 15 or 30 years, which is synchronized with the term of the loan, and the term of the ordinary life insurance policy is determined by ourselves.
Savings Mortgage protection insurance is generally more expensive than traditional term life insurance policies.
When should I choose mortgage protection insurance?
In some special cases, mortgage protection insurance may be useful.
Because mortgage protection insurance is generally considered to be an ordinary life insurance product which does not require any medical examination and whose delivery is guaranteed. If we are in poor physical condition, there are many medical and illness records. At the same time, it is also difficult to pass the medical exam and the underwriting standards of the insurance company. It is therefore reasonable to choose mortgage protection insurance.
Summary
With the continuous development of the insurance industry and related laws and regulations, more and more non-medical life insurance products are appearing on the market, the application process is gradually being digitized and networked, and the insurance policy application process is no longer an obstacle.
For households who need protections such as mortgage protection insurance when buying a home, the real problem is how excellent professional brokers can help policyholders identify trigger policies. more complete claims, and between budget and additional conditions. The balance can help each family configure insurance products that can really protect the family.
The bottom line is, spending money to protect yourself is more reasonable than spending your money to protect financial institutions.
