Mortgage Payment Protection Insurance Basics
With property values dropping and businesses downsizing, many Americans are concerned about the security of their jobs and, ultimately, their homes. One solution may be Mortgage Payment Protection Insurance (MPPI).
If you’ve never heard of Mortgage Payment Protection Insurance before, its sole purpose is to cover your mortgage payment in the event you become unemployed or disabled (similar to Mortgage Life Insurance except death isn’t required for a payout). Like any other insurance product, you pay a premium for this coverage. If you never need the coverage, you’re out the money you’ve paid out in premiums. If you do become disabled or lose your job, though, your mortgage payment is covered for a predetermined period of time or until you are working again and able to take over the payments yourself.
Some people confuse Mortgage Payment Protection Insurance with Private Mortgage Insurance (PMI). PMI is sometimes required by mortgage lenders when borrowers are unable to come up with the standard 20% down payment on a mortgage. PMI protects the lender in the event that the borrower defaults on the loan, thereby allowing those who would otherwise be unable to obtain traditional financing for a home to do so.
Why would you need MPPI? It is basically an insurance product, so if you were without any other source of life or disability insurance, it may make sense for you. Another reason you may want to consider MPPI is if you feel you may be at risk of losing your job. One of the circumstances covered by these policies is the loss of job. If you do lose your job, you would be covered. The standard period of coverage for MPPI is twelve months. After that, you would need to resume the payments yourself.
One of the benefits of MPPI versus life insurance or disability insurance is that it is generally easier to obtain than other insurance products. Typically, no physical exam is required to qualify for MPPI coverage. There are also plenty of companies out there that offer MPPI coverage, but be careful to read the policy information carefully and check out the carrier’s ratings and credentials before you agree to purchase a policy.
One concern about MPPI coverage is that while it does cover your mortgage payment, that’s all it covers. If you were to become unemployed or disabled, you would still be responsible for any other bills you may have. In a worst case scenario, even though your mortgage was being paid, you may still need to sell your home to raise the cash to pay off your other obligations. Another concern some consumers have is that the premiums for MPPI policies are often relatively expensive compared to other insurance products like life or disability coverage.
If you have concerns about your ability to make your mortgage payments if you were out of work or unable to work, you may want to look into MPPI.
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