Whether it’s where you plan to start your family or your retirement, your home may be your single most significant investment and greatest potential burden, and as such, it deserves safeguarding. When it comes to financial planning for the future, many people don’t want to talk about life insurance because it means thinking about the unchangeable and unforgiving reality: everyone dies one day.

But mortgage life insurance is not about you and how you’ll leave this world. It is about who you’ll leave behind and how your loved ones will live on in your absence.

If you decide to buy MPI, avoid missing the enrollment window.

Because plans are designed around your mortgage debt, MPI is often sold during home-buying, so new homeowners find many offers in their mailboxes. Most MPI plans must be purchased within 24 months of closing a loan. Some companies allow extended enrollment periods of up to 5 years.

If you missed your enrollment window to qualify for MPI, you might consider buying a term life policy with comparable coverage.

If something happened to you, would your loved ones be able to pay off the family home without your support?

Mortgage protection insurance (MPI) is a unique life insurance for homeowners, designed to cover your mortgage payments in the event of death or significant loss of income.

What and how much your insurance covers will depend on the provider and your policy’s specific terms and conditions.

Premium

The amount you pay an insurance company in exchange for policy coverage. The price of your premium is determined by the type of coverage you purchase and by factors (e.g., age, health status, gender) influencing the likelihood of your dying while the policy is active. For most MPI policies, the premiums will stay the same throughout the policy, though the payout value typically decreases.

Beneficiary

The person or entity that receives the payout of a policy if you pass away.

The beneficiary of an MPI policy will always be your mortgage company or lender, not whoever you want to choose, like with life insurance. If you die while your MPI policy is active, your insurance provider will give the payout directly to your mortgage lender to cover your remaining mortgage payments.

Cancellability

Mortgage protection insurance is usually cancellable, meaning that policyholders can choose to cancel the coverage at any time without penalty. However, canceling the policy means losing the associated protection.

Disability Coverage

Some mortgage protection insurance policies also include disability coverage. If the policyholder becomes disabled and cannot work, the insurance may cover mortgage payments for a specified period. The terms and conditions of disability coverage can vary among insurance providers.

Death Benefit

The untaxed sum of money the insurer pays your beneficiary when you die. Most MPI policies include a clause limiting the death benefit to your outstanding mortgage balance. However, conditions vary; some only cover a set number of payments.

Riders are optional amendments to a basic insurance policy that provide extra coverage for an additional cost (expressed as a higher premium). A Return of Premium rider or a Living Benefits rider can easily customize your MPI policy for more protection against risks. Note that a rider is not a standalone insurance product but an add-on benefit that must be attached to a full-fledged MPI policy. MPI is similar to traditional term life insurance in how it generally works. You buy a mortgage protection policy to cover a specific number of years –or “term,” which usually coincides with the length of your outstanding mortgage. You pay your insurance provider a monthly premium to keep your coverage active and your home and loved ones protected. When your term ends or your mortgage is paid off in full, your MPI coverage stops. If you pass away before your loan is paid off while your policy is still in force, a payout – known as the “death benefit”– is made to your beneficiary to cover your remaining mortgage payments. The way an MPI payout transpires is what, in part, differentiates MPI from other types of life insurance. Under an MPI plan, the beneficiary is always your mortgage lender– not your spouse or estate– and the benefit money can only be used to pay off your outstanding loan balance, nothing else. Your loved ones do not receive a check with this type of insurance as it’s designed to prioritize protecting your home for their continued use in the event of your death. For most MPI policies, the death benefit decreases over time as you pay off your mortgage to match the remaining balance. That means the value of your policy usually decreases over its term, even though your premiums stay the same.