Is mortgage protection insurance necessary for homeowners?

If you were to die with a mortgage balance remaining, mortgage protection insurance — also known as mortgage life insurance — would ensure it got paid off. That way, your loved ones could continue to live in your home without worrying about continuing to make payments.

This might sound like a good arrangement, especially considering how big of an investment a home is and how much of a family’s budget monthly mortgage payments can comprise. But is mortgage protection insurance really necessary, and is it actually the best way achieve that peace of mind?

life insurance, often offered by mortgage lenders and insurance companies, that ensures any balance remaining on your mortgage gets paid off in the event you pass away. “Some mortgage protection insurance policies also offer payment protection for a limited time if you lose your job or experience a disability during the term, although that is not necessarily standard with all policies,” said Yahoo Finance.

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This is different from a typical life insurance policy where a death benefit is paid out to your beneficiaries. Instead, with mortgage protection insurance, the payout goes directly to the mortgage lender. Note that MPI typically will “only cover the principal and interest portion of a mortgage payment,” meaning “other fees like HOA dues, property taxes and homeowners insurance would still be your responsibility,” said Bankrate.