After closing the loan, many people immediately started receiving daily requests at the post office urging them to buy Mortgage Protection Life (MPI). Simply put, MPI is a form of life insurance sold by banks linked to lenders and private insurance companies, which receive information about personal mortgages through public records.
MPI notification strategy
MPI applications are often processed as official applications from home lenders, supplemented with relevant details, such as the names of the borrower and the lender, the types of loans, and the outstanding amounts. In bold type, these articles contain harmful topics such as:
Important notice! Please fill and return!
final notification! Home Property Protection Card!
Visit Notification! Free Home Security!
These announcements are often followed by shocking statements, such as, "If you die tomorrow, will your family be able to keep going and endanger their lives?" Finally, these applications provide solutions by providing programs that claim to protect families after a disaster, by paying the kidnappers.
Do you need life insurance to protect your mortgage?
In fact, borrowed life insurance policies are generally not well-advised for the following reasons:
Lack of flexibility: Unlike regular life insurance, where the beneficiaries are unable to access the insurance premiums as they see fit, most homeowner insurance companies send interest payments directly to lenders, so that your beneficiaries never see any money. Is.
Higher premiums: If you are a healthy person who has never used tobacco, MPI is often more expensive than long-term health insurance.
Uncertainty: Unlike other types of insurance, it is difficult to find MPI quotes online, which is a big problem because MPI real estate prices can vary greatly.
Flexible Premiums: Unlike term policies, which charge a fixed premium for 30 years without a dramatic increase in value, premiums in MPI policies can only be adjusted for the first five years, after which they can increase at any time. it could be.
Beware of declining payments
Some MPI policies actually provide policies that charge a fixed premium during the policy. However, in most cases, payments to these policies may decrease over time as potential payments fall. This type of mortgage protection insurance sometimes referred to as "short-term insurance," is designed to pay off your loan balance while each beneficiary receives a portion of your loan amount. he pays. As a result, the potential cost of MPI policy decreases with each mortgage payment.
On the other hand, some of the new MPI products have a feature known as the “Death Rate”, where there is no reduction in payments. For example, if you cover a $ 100,000 mortgage, the beneficiary (not the lender) will receive the full $ 100,000, even if the mortgage is reduced to $ 65,000. And if you pay off a loan while the policy is in effect, some policies allow you to turn your mortgage insurance into a life insurance policy.
Mortgage protection life (MPI) is a life insurance policy sold by banks linked to lenders who get information about your mortgage from public records.
Mortgage insurance companies appeal to businesses by telling people who promise that their loved ones will face financial hardship without such policies.
Such products have disadvantages, such as high premiums and inconsistencies.
These products may attract people who want to take policy because of poor health or poor medical history.
Some MPI policies will reimburse you for your premiums if you never lodge a claim after repaying your loan. However, refunds will be much less expensive, as inflation is likely to undermine their value. Also, if you bought short-term health insurance, you would lose the opportunity to invest any money you have saved.
The conclusion line
Those who are worried about expensive mortgages for their loved ones should consider term life insurance, which is usually a better solution than mortgage protection life insurance.