Mortgage protection insurance vs. term life insurance

Mortgage protection insurance (MPI) guarantees mortgage debt payment in case of the borrower’s death. Term life insurance can be used to pay for anything, including a mortgage, and is typically the better choice.

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By

Katherine MurbachEditor & Licensed Life Insurance AgentKatherine Murbach is a life insurance and annuities editor, licensed life insurance agent, and former sales associate at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

Edited by

Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|2 min read

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Mortgage protection insurance (MPI) is a type of term life insurance that only covers your monthly mortgage payments if you die. Its limited compared to traditional life insurance, which provides a tax-free lump sum of cash that can be used to pay for any expenses after your death.

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Life insurance terms you should know
  • Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.

  • Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.

  • Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.

  • Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.

  • Insured: The person who is covered by the insurance policy.

  • Policy: The legal document that includes the terms and conditions of your life insurance contract.

  • Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.

  • Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.

  • Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.

  • Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.

  • Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.

  • Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.

What is mortgage protection insurance?

Mortgage protection insurance is a personal life insurance policy that covers your monthly mortgage payments — and only your mortgage payments — if you die. Its meant to protect your family from having to sell or lose their home due to the loss of your income.

Mortgage protection insurance is different from private mortgage insurance (PMI), which protects the lender and is required by most lenders if you put less than 20% down on a home.

Mortgage protection insurance vs. term life insurance

Mortgage protection insurance is a type of decreasing term life insurance tied to the balance on your mortgage. The death benefit decreases over time to coincide with your outstanding mortgage, but premiums remain level. 

Traditional term life insurance has a level death benefit and level premiums. You buy a policy for a set period of time, pay the premiums, and, in the event of your death, have a death benefit paid out to your beneficiary.

The largest difference between the two is who the funds get paid to upon your death. With mortgage protection insurance, the money is paid directly to your lender. Under a traditional term life policy, you get to name any beneficiary (such as family or loved ones).

See how term life insurance compares to MPI and PMI.

Term life insurance

Mortgage protection insurance

Private mortgage insurance

Policyowner

Borrower

Borrower

Borrower

Beneficiary

Anyone

Mortgage lender

Mortgage lender

Death benefit

Level

Decreasing

N/A

Premiums

Level

Level

May vary

Cost

$19/month

$99.23/month

0.5% to 1% of the loan/month

Coverage limit

Up to 30 times your income

$25,000

Based on loan amount

Collapse table

Mortgage protection insurance qualifies as guaranteed issue life insurance because it doesn’t require a medical exam, which makes it significantly more expensive for less coverage compared to term life insurance. Coverage available is limited to $25,000, which may not completely cover your outstanding mortgage payments.  

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Should you buy mortgage protection insurance or life insurance?

Unless you have a complicated medical background that would disqualify you from coverage, traditional term life insurance is a better option than mortgage protection insurance. Here’s why:

  • Term life covers everything. Your beneficiaries can use the death benefit for any expenses — not just mortgage payments.

  • Term life has higher benefit amounts. Mortgage protection insurance restricts you to low coverage limits (up to $25,000 with most insurers) that may not fully cover your mortgage balance. 

  • Term life offers more coverage lengths. MPI usually comes in 15- or 30-year terms (just like a mortgage), while term life policies have shorter or longer terms depending on your needs.

  • Term life is less expensive. MPI policies almost always cost more than traditional term life.

If skipping the medical exam is important to you, there are affordable no-medical-exam term life insurance options available, too. Still not sure which type of insurance is right for you? Reach out to a Policygenius agent for free to talk through the different options available. 

Author

Katherine Murbach is a life insurance and annuities editor, licensed life insurance agent, and former sales associate at Policygenius. Previously, she wrote about life and disability insurance for 1752 Financial, and advised over 1,500 clients on their life insurance policies as a sales associate.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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