What is mortgage protection insurance: Good idea or bad investment?

Mortgage protection insurance (MPI) is a life insurance policy with a decreasing benefit that only pays out to your lender to cover your mortgage debt. In most cases, however, term life insurance provides better coverage.

Katherine Murbach PolicygeniusRebecca Shoenthal author photo

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Katherine Murbach

Katherine Murbach

Associate Editor & Licensed Life Insurance Expert

Katherine Murbach is an associate editor and a licensed life insurance expert 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.

&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.

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By

Patrick Hanzel, CFP®

Patrick Hanzel, CFP®

Certified Financial Planner™ & Advanced Planning Team Lead

Patrick Hanzel, CFP®, is a Certified Financial Planner™ and Advanced Planning Team Lead at Policygenius. His expertise has been featured at Lifehacker, Consumer Affairs, Authority Magazine, Thrive Global, and Fatherly.

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What is mortgage protection insurance?

Mortgage protection insurance, or MPI, is a type of life insurance designed to pay off your remaining mortgage when you die. Unlike other types of life insurance, MPI only pays the death benefit to your mortgage lender, making it a much more limited option than a traditional life insurance policy.

How much does mortgage protection insurance cost?

The cost of mortgage protection insurance depends on your age and the price of the home you want to insure. 

For example, a 30-year-old applying to cover a $500,000 mortgage over 30 years can expect to pay roughly $60 per month according to sample rates estimated by the U.S. Department of Veteran Affairs [1] — a reputable source whose quotes are representative of the market. Rates will vary by company, like any other form of insurance. 

By contrast, a 30-year-old applying for a $500,000, 30-year term life insurane policy through one of Policygenius’s partners can expect to pay as little as about $30 per month. This means MPI policies can cost twice as much as term life insurance policies.

Is buying mortgage protection life insurance a good idea?

Outstanding debt, such as a mortgage on your home, is the main reason many people get life insurance. Mortgage protection insurance is worth getting if you can't get a life insurance policy due to age or health issues

For most people, however, a term life insurance policy is a better option. It’s more affordable, provides more protection for your family, and allows for more flexibility than MPI policies do.

Even if you think an affordable term policy is out of reach because of your health or any other factors, it’s worth getting a free quote. Different companies have different guidelines when it comes to health conditions, so you may be able to get cheaper rates with one insurance company than another.

The best way to find the right life insurance for your needs is to work with an independent broker. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.

Best mortgage protection insurance companies

Mortgage protection insurance offers limited coverage and is more expensive than term life insurance, which is affordable and provides a more comprehensive financial safety net for your family. 

If you want to make sure the rest of your mortgage is paid off if you die, we recommend purchasing a 15-, 20-, or 30-year term life insurance policy instead of MPI. These are our top picks.

Methodology: How we chose the best mortgage protection insurance companies of 2022

We don't get paid for our company reviews and use an extensive rubric of criteria covering policy details, price, financial confidence, third-party ratings, and customer experience to assign unbiased ratings out of five stars. Any recommendations we make are based on internal and external expert opinions and data from our Policygenius Price Index, which uses real-time rate data from leading life insurance companies to determine pricing trends.

Our ratings and reviews can help point you to an insurer you can rely on for your family’s financial protection, but the best life insurance company for you is dependent on multiple factors. A licensed agent at Policygenius can work with you through the application process so you’re getting coverage from the best insurer for your circumstances at the most competitive price.

→ Read more about our reviews methodology here

Best overall mortgage protection term life insurance

4.7

Policygenius rating

How we score: Policygenius’ ratings are determined by our editorial team. Our methodology takes multiple factors into account, including pricing, financial ratings, quality of customer service, and other product-specific features.

Banner Life logo

Banner Life has some of the longest term lengths — up to 40 years — and most competitive life insurance rates available, even for people with a history of medical conditions.

Pros

  • Very competitive rates

  • Covers many health conditions

  • Term lengths up to 40 years

Cons

  • Strict temporary coverage eligibility

  • Reconsideration is paid for by the applicant

Why we picked it

In the vast majority of cases, term life insurance is the best way to protect your mortgage, and, more importantly, your family. Banner Life offers cheap pricing when compared to other companies, a no-medical-exam option for fast approval, and term lengths as long as 40 years.

Runner-up

Protective

4.9

Policygenius rating

How we score: Policygenius’ ratings are determined by our editorial team. Our methodology takes multiple factors into account, including pricing, financial ratings, quality of customer service, and other product-specific features.

Protective logo

Protective has some of the most affordable and comprehensive life insurance options available.

Pros

  • One of the best values on the market

  • Variety of coverage amounts and term lengths

  • Solid suite of online tools

Cons

  • Slow application approval

  • Zero no-medical-exam options

Why we picked it

Protective offers competitive pricing, similar to Banner Life. It’s an A+ A.M. Best rated company — which means it has a superior ability to meet its financial obligations — that also offers term lengths up to 40 years to ensure you have financial protection as long as you need it. 

Ready to shop for the best term life insurance?

Start calculator

What does mortgage life insurance cover?

Mortgage protection insurance is a type of life insurance designed to pay off your remaining mortgage when you die. Because of this, MPI is a more limited type of insurance that won’t provide any death benefit payout to your family because its sole purpose is to provide a payout to your mortgage lender.

Mortgage protection insurance: pros and cons

Advantages of mortgage life insurance

  1. Takes the guesswork out of paying off a mortgage Receiving a lump sum of money from a traditional term policy can be overwhelming. Mortgage protection insurance is matched up to the mortgage balance and the money will go only toward that.

  2. No underwriting Some MPI policies allow the policyholder to skip the underwriting process, which insurers use to assess your insurance risk. Since life insurance rates are largely determined by your health, skipping underwriting could result in higher premiums, but it can be worthwhile if poor health would raise the premiums of a standard term life insurance policy further.

Disadvantages of mortgage insurance

  1. Less financial protection Being able to cover mortgage payments is great, but you’re doing so at the expense of your family’s other debts and bills. The money also goes straight to your mortgage lender, not your family. A regular term life insurance policy allows you to cover your mortgage, plus other expenses.

  2. There are cheaper options available MPI is more expensive (typically more than double) than a typical term life insurance policy for an applicant in excellent health.

Term life insurance vs. mortgage protection: Which is best for you?

Mortgage protection insurance is broadly similar to term life insurance in how it works. You buy a policy, pay regular premiums, and at the end of the policy term, your coverage ends. If you die during the term of the policy, a death benefit is paid out to your beneficiary.

However, MPI has two key differences from term life insurance:

  • Beneficiary: The mortgage company or lender is your policy's beneficiary, not your family.

  • Death benefit: The death benefit decreases over time as you make mortgage payments, similar to a decreasing term life insurance policy. Most term life policies have level death benefits that always stay the same.

Mortgage protection insurance protects your family’s housing if you die prematurely and haven't paid off your mortgage. But because it doesn’t cover other vital costs, such as bills and everyday expenses, it’s best to buy a traditional term life insurance policy instead. 

We recommend a 15-, 20-, or 30-year term life insurance policy for homeowners over MPI because it can cover far more expenses and pays out to your family. On the other hand, if you pay off your mortgage and find you no longer need the life insurance policy, you can cancel it at any point.

If you are ineligible for traditional life insurance coverage due to a health condition or any other factors, a mortgage protection insurance plan is a good backup.

Ready to shop for the best term life insurance?

Start calculator

Is mortgage protection insurance required?

No. MPI is not the same as private mortgage insurance (PMI), which may be required by your lender.

Mortgage protection insurance vs. private mortgage insurance

MPI differs from PMI, which lenders require you to purchase if you make a down payment of 20% or less. Lenders then add any premiums to your regular mortgage balance. 

Frequently asked questions

How does mortgage life insurance work?

Mortgage protection life insurance pays out to your mortgage lender when you die. You pay premiums and the death benefit decreases alongside your mortgage.

Is mortgage protection insurance the same as life insurance?

While it’s technically a type of life insurance, mortgage protection insurance only pays out to your lender and the amount and term is tied to your mortgage. A life insurance policy covers any expenses and pays out to whoever you want, with flexible coverage options.

What is the average cost of mortgage protection insurance?

Mortgage protection insurance is generally double the cost of a comparable term life insurance policy. For example, a 30-year-old would pay on average $60 a month to cover a $500,000 mortgage over 30 years. Meanwhile, the same 30-year-old would pay on average about $30 per month for a $500,000, 30-year term life insurance policy.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. U.S. Department of Veteran Affairs

    . "

    Veterans' Mortgage Life Insurance: Premium Calculator

    ." Accessed August 31, 2022.

Authors

Associate Editor & Licensed Life Insurance Expert

Katherine Murbach

Associate Editor & Licensed Life Insurance Expert

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Katherine Murbach is an associate editor and a licensed life insurance expert 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 & Licensed Life Insurance Expert

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

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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.

Expert reviewer

Certified Financial Planner™ & Advanced Planning Team Lead

Patrick Hanzel, CFP®

Certified Financial Planner™ & Advanced Planning Team Lead

gray linkedin icon link

Patrick Hanzel, CFP®, is a Certified Financial Planner™ and Advanced Planning Team Lead at Policygenius. His expertise has been featured at Lifehacker, Consumer Affairs, Authority Magazine, Thrive Global, and Fatherly.

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