Mortgage Protection Insurance For Seniors

Oct 25, 2023 | Mortgage Guides

Disclaimer: Wesley Mortgage does not offer Mortgage Protection Insurance. We’ve prepared this guide to help you better understand your mortgage options.

Folks often believe that after a certain age, they can no longer qualify for mortgage protection insurance (MPI). That is not always the case.

Like traditional life insurance policies, mortgage protection safeguards what many consider their largest asset and financial obligation, their home. Property owners may acquire such a policy from most insurance companies up to the age of 80. Even after that, options, such as burial or final expense whole life insurance, are available.

This guide provides all the information needed to understand mortgage protection insurance as a senior.

What Is Mortgage Protection Insurance?

Mortgage protection insurance, also known as mortgage life insurance, provides the financial service of paying off a borrower’s remaining home loan balance in the event of their disability, job loss, or death. This insurance is not required unless under specific state laws.

With MPI, policyholders do not have to burden their loved ones with the responsibility of covering their mortgage. While similar to a term life insurance policy, mortgage protection differs because the benefit payout goes not to the borrower or their beneficiaries but to the lender to ensure it pays off the mortgage.

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What Are the Eligibility Requirements for Mortgage Protection Insurance?

Although not a requirement, mortgage protection insurance can benefit anyone with a home loan balance. Alas, that is not to say that everyone may qualify. MPI is often excluded from those who are:

  • Non-U.S. citizens
  • Over the age of 80
  • With permanent disability

Despite these exclusions, borrowers who fail to qualify are often better suited for life insurance. Many companies provide policies to temporary U.S. residents (i.e., visa and green card holders), citizens aged 80 or more, and even those with disabilities.

What Are the Other Types of Mortgage Insurance?

Mortgage protection insurance often gets confused with many common insurances when obtaining a mortgage. Lenders require some policies, while others are optional when bundling, but each differs from MPI. Learn about other forms of insurance below:

  • Private Mortgage Insurance (PMI): Required when making less than a 20 percent down payment on a conventional loan. Government-backed lenders have similar policy types under different names, such as mortgage insurance premiums (MIP) for FHA loans.
  • Homeowners Insurance (HOI): Required for home loan approval, HOI protects the policyholder’s property from damage, injury, theft, and natural disasters.
  • Mortgage Disability Insurance: A policy often bundled with MPI and covers a disabled borrower’s mortgage payments for up to a specific period.
  • Mortgage Unemployment Insurance: Another policy that can be bundled with MPI and helps pay a homeowner’s mortgage when unemployed.
  • Life Insurance: Often compared with MPI but with one key difference. The beneficiaries, rather than lenders, receive payouts and can use them for different financial obligations not restricted to mortgages.

How Does Mortgage Protection Insurance for Seniors Work?

The average pensioner has a mortgage balance of $50,000. Therefore, a backup plan is essential to pay off the remaining amount. That is where MPI comes into the picture.

With the average MPI policyholder about 55 years old, many are on the cusp of being seniors. Still, only ten percent of seniors have mortgage protection insurance. A significant reason is that life insurance policies appear as better options with more benefit privileges and lower rates.

Alas, seniors looking for an easier underwriting process may fancy the lack of a medical exam requirement with MPI. Retirees seeking additional protection, such as disability or job loss, may also find virtue in an MPI policy.

Mortgage Protection Insurance When Retired

Many homeowners retire before paying off their mortgage. Thanks to the low insurance costs, many seniors can have peace of mind knowing they can fund mortgage protection through their fixed incomes.

How Much Does Mortgage Protection Insurance Cost?

Mortgage protection insurance premiums are most often paid with the mortgage payment. Several factors can impact the cost of MPI coverage. The insurance company will evaluate the payout and premium cost based on the borrower’s balance and the remaining duration of the loan. They will also account for the policyholder’s age, job, and risk level.

On average, an MPI policy costs between $30 and $40 per month for every $100,000 borrowed.

How Much is Mortgage Protection Insurance for Seniors?

The cost of mortgage protection varies based on health, age, and how much coverage the borrower needs. But what impact does that have on seniors?

One merit is that senior homeowners tend to require smaller coverage amounts. For example, the typical mortgage protection insurance policy pays out $250,000, but a senior has a balance of $50,000. Less coverage means lower premiums.

Alas, the risk that comes with older age can counter-impact costs. Also, being healthy often results in better rates, but MPI can benefit those with health conditions that make term life insurance too expensive. Nonetheless, depending on such factors, mortgage protection can cost as little as $13 a month.

Pros and Cons of Mortgage Protection Insurance

While it is not mandatory to possess mortgage protection insurance, it is worth assessing its benefits and drawbacks to determine whether such a policy could be helpful.

What Are the Benefits of Mortgage Protection Insurance for Seniors?

  1. Mortgage Balance Is Paid: MPI ensures that a homeowner’s mortgage gets covered if they die before paying off their mortgage.
  2. Skipping the Underwriting Process: Unlike life insurance policies that use underwriting to evaluate risk, this process, including medical exams, is not necessary for MPI.
  3. Accessible and Flexible Policies: With guaranteed approval, MPI is ideal for folks with issues qualifying for life insurance. Not to mention, borrowers can adjust or cancel their policy anytime.

What Are the Drawbacks of Mortgage Protection Insurance for Seniors?

  • Declining Payoffs: Despite paying the same premium for the entirety of the term, the payout decreases to match the remaining balance.
  • Restrictions on Policy Benefits: While an MPI payout relieves the financial stress for families, mortgage protection only pays off the home loan and not other expenses, like utility bills, property taxes, funeral costs, etc.
  • Lenders Are the Beneficiaries: With life insurance, the policyholder’s beneficiary can spend the benefit money however they see fit. With MPI, paying off the mortgage is the sole choice.‍

How Do I Get Mortgage Protection Insurance?

Borrowers might not need to purchase this insurance if they are in excellent health, have secure employment, do not have lifestyle hazards, and are protected elsewhere via life insurance, for instance.

If MPI aligns with your goals, comparing policies amongst various providers is next. Choosing the proper plan is critical, as is deciding where to buy it. There are several places to find an MPI policy, such as mortgage lenders, insurance providers, and private companies.

Disclaimer: Wesley Mortgage does not offer Mortgage Protection Insurance. We’ve prepared this guide to help you better understand your mortgage options.

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