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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Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

Updated February 2, 2022 | 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. It's limited compared to traditional life insurance, which provides a tax-free lump sum of cash (the death benefit) that can be used to pay for any expenses after your death.

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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. It's 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 insuranceMortgage protection insurancePrivate mortgage insurance
PolicyownerBorrowerBorrowerBorrower
BeneficiaryAnyoneMortgage lenderMortgage lender
Death benefitLevelDecreasingN/A
PremiumsLevelLevelMay vary
Cost$19/month$99.23/month0.5% to 1% of the loan/month
Coverage limitUp to 30 times your income$25,000Based on loan amount

Methodology: Sample premiums are for a 50-year-old male non-smoker with a Preferred health rating buying a 30-year term life insurance policy and guaranteed issue policy for $25,000; Life insurance averages are based on a composite of policies offered by Policygenius from AIG, Banner, Brighthouse, Lincoln, Mutual of Omaha, Pacific Life, Protective, Prudential, SBLI, and Transamerica and may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 1/1/2022.

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.  

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. 

Frequently asked questions

How does mortgage insurance work in case of death?

Mortgage protection insurance (MPI) pays the balance of an outstanding mortgage to the lender when you die.

Can you use life insurance to pay off a mortgage?

The life insurance death benefit can be used to pay for pretty much anything, including mortgage payments.

What is the difference between life insurance and mortgage life insurance?

Traditional life insurance insures the policyholder and pays out a benefit to their beneficiaries. Mortgage protection insurance is a type of decreasing term life insurance that pays out a benefit to a lender and is used solely to pay off a mortgage balance.