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New Home? Mortgage Protection vs Life Insurance

June 16, 2025
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Buying a new home? Should you consider adding insurance coverage to protect your heirs? When discussing life insurance for a mortgage, it’s important to differentiate between mortgage protection insurance (MPI) and traditional life insurance, such as term life insurance.  

Mortgage Protection Insurance (MPI):

  • Purpose: Specifically designed to pay off the remaining balance of your mortgage if you pass away during the policy term.
  • Beneficiary: The policy’s payout goes directly to the mortgage lender.
  • Coverage: Typically decreases as your mortgage balance decreases.
  • Underwriting: Often requires minimal or no medical underwriting, making it potentially accessible to those with health issues.
  • Cost: Generally considered more expensive than traditional term life insurance for comparable coverage.
  • Flexibility: Limited, as the death benefit can only be used to pay off the mortgage. 

Traditional Life Insurance (like Term Life Insurance):

  • Purpose: Provides a death benefit to your chosen beneficiaries for various financial needs, including covering the mortgage, replacing income, and other expenses.
  • Beneficiary: You designate who receives the death benefit, such as your family or other chosen beneficiaries.
  • Coverage: The death benefit typically remains fixed throughout the policy term.
  • Underwriting: Usually involves a medical exam and health questions to determine eligibility and premium costs.
  • Cost: Can be more affordable than MPI, especially for healthy individuals.
  • Flexibility: Allows beneficiaries to use the death benefit as needed. 

Key Differences Summarized:

Feature Mortgage Protection InsuranceLife Insurance
CoverageDecreases over time as your mortgage is paid down.Death benefits remain fixed.
PayoutPaid directly to the mortgage lender.Paid to your named beneficiaries.
FlexibilityLimited; can only be used to pay off the mortgage.Flexible; can be used for various needs.
CostGenerally more expensive.Can be more affordable.
Medical ExamOften not required.Typically required.

Should You Get Mortgage Life Insurance (MPI)?

  • MPI might be considered if you have trouble qualifying for a standard life insurance policy due to health reasons.
  • It could be a simple option if your primary concern is solely ensuring the mortgage is paid off.
  • However, many people find greater value and flexibility with a traditional life insurance policy, which offers broader financial protection for your family. 

It is crucial to carefully weigh the pros and cons and potentially consult with a financial professional to determine the best approach for your specific needs and circumstances. Your Loan Zone Officer is happy to discuss this with you if you have questions or stop by one of our five convenient locations and speak to the Branch Manager. 

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