mortgage protection insurance
You are required to have certain types of insurance on your home. If you do not take out a compulsory insurance policy, your insurance expires or you do not have enough coverage, we take out a policy for you. We do this so your home can be repaired or rebuilt if it is damaged. This is called lender-placed insurance, and it has serious drawbacks compared to most insurance policies.
If a lender placed insurance policy is required, we will add the cost to your monthly mortgage payment. We will hold it in an escrow account until the insurance bills are due. We will then use that money to pay the bills on your behalf.
To cancel the insurance purchased by the lender, you must purchase a policy yourself or increase the coverage to the required amount. To prove your eligibility, send us a copy of your policy declarations page (usually the first page). We will cancel the insurance contracted by the lender once we have confirmed that you have sufficient coverage.
Mortgage insurance in case of death or disability
Beware of "Piggyback" Second Mortgages As an alternative to mortgage insurance, some lenders may offer what is known as a "piggyback" second mortgage. This option may be marketed as cheaper to the borrower, but that doesn't necessarily mean it is. Always compare the total cost before making a final decision. Learn more about piggyback second mortgages. How to Get Help If you are behind on your mortgage payment, or are having difficulty making payments, you can use the CFPB Find a Counselor tool for a list of housing counseling agencies in your area that are approved by HUD. You can also call the HOPE™ hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).
How much does mortgage life insurance cost per month?
Mortgage insurance is an insurance policy that protects the lender or mortgage holder in the event that the borrower defaults, dies, or is unable to meet the contractual obligations of the mortgage. Mortgage insurance can refer to private mortgage insurance (PMI), qualified mortgage insurance premium (MIP) insurance, or mortgage title insurance. What they have in common is the obligation to indemnify the lender or the owner of the property in the event of specific losses.
Mortgage life insurance, on the other hand, which sounds similar, is designed to protect heirs if the borrower dies while owing mortgage payments. You can pay the lender or the heirs, depending on the terms of the policy.
Mortgage insurance can come with a typical premium payment, or it can be compounded into a lump sum payment at the time the mortgage is created. Homeowners who are required to have PMI due to the 80% loan-to-value rule may request that the insurance policy be canceled once 20% of the principal balance has been paid. There are three types of mortgage insurance:
Mortgage protection insurance in case of death
If you've recently taken out a mortgage or home equity line of credit, you've likely received a flood of mortgage protection insurance offers, often disguised as official communications from the lender, with little detail about what they're selling.
Mortgage Protection Insurance (MPI) is a type of life insurance designed to pay off the mortgage in the event of your death, and some policies also cover mortgage payments (usually for a limited period of time) if you become disabled.
Term life insurance is designed to pay a benefit to the person(s) or organization(s) you designate if death occurs within a specified period of time. You choose the amount of the benefit and the period of time. The price and amount of the benefit are usually the same throughout the term.
If you own your home, MPI could be a waste of money. And most people don't need MPI if they have enough life insurance (even if the offers say otherwise). If you don't have enough life insurance, consider buying more. Term life insurance is likely to be a more flexible and affordable option for those who qualify.
