Insurances provide lifelong financial protection to policyholders and their family members. Two such important insurances are mortgage protection insurance and life insurance policies. Understanding Mortgage protection insurance vs. life insurance is imperative to make informed decisions. Mortgage protection insurance provides financial support to homeowners if they fail to complete the payment of a mortgage loan. On the other hand, life insurance is designed to offer financial aid to insured persons’ family members in case of illness and death.
The two policies differ on many other factors. In the following section you will find a detailed discussion on the different benefits offered by the two insurance policies.
What is Mortgage Protection Insurance?
Mortgage protection insurance or MPI typically pays off your outstanding home loan in case you fail to complete the payment. By doing so it protects yours and your family members’ ownership of the home. It safeguards the home ownership of the family members of the insured person if the homeowner dies before completing the mortgage loan.
On the other hand, it also provides financial aid to the homeowner in case he is unable to pay the loan due to temporary unemployment, illnesses or accidents. However, the amount provided by MPI can be used only to pay off the mortgage loan. The amount can’t be used for other purposes like paying medical bills or credit card loans.
What is a Life Insurance Policy?
Life insurance, on the other hand, provides death benefits to the family members of the insured individuals after their demise. Unlike MPI, the insurance money can be used for miscellaneous purposes as per the beneficiaries needs. It can be used to replace lost incomes, paying off credit card debts, medical bills and even mortgage loans and so on.
There are also multiple types of life insurance policies. These include term life insurance, whole life insurance, and universal life insurance and so on. All these different policies come with different features and benefits. The insurance premium varies according to the benefits provided by the different categories.
Differences between Mortgage Protection Insurance and Life Insurance
While discussing mortgage protection insurance vs. life insurance the two key considerations are the difference in scope and purposes of the policies. Here are the key differences between the two insurance that would help you to make an informed decision.
Policy Coverage
The mortgage protection policy covers only outstanding home loans in case policyholders fail to pay off the entire loan. The life insurance can be used for any purposes including mortgage payment. The amount is paid directly to the beneficiaries and do not involves any restriction on how the money is to be spend.
Duration of the Benefits Provided
Mortgage protection insurance generally pays off your monthly home loan payment on a regular basis until the loan is completed. However, in case of the homeowner’s death, the family members can also receive the entire amount in lump sum. Life insurance, on the other hand, is always paid off in lump sum in case of policyholder’s death. However, in cases such as income protection or temporary unemployment, the insurance covers monthly expenses.
Premium Payment Policy
In case of mortgage protection insurance policy the monthly premium depends on the amount of home loan to be covered. On the other hand, Life insurance policy’s monthly premium depends on the health condition of the applicant, salary and occupation.
When the Policy is paid out?
In both cases the policy is paid out after the demise of the policy holder. However, the mortgage protection insurance also provides protection in case of terminal illnesses or temporary unemployment.
Endnote
The blog has discussed mortgage protection insurance policy vs. life insurance policy. Hope this proves useful for you to make informed decisions. If you are a homeowner you must apply for a mortgage insurance policy. It makes sure that your home loan insurance amount does not get wasted for other uses. This makes it a more secure policy for homeowners.