Are Your Assets Protected with Mortgage Insurance?
You just got a mortgage and were told you have Private Mortgage Insurance. Many people think that this will protect their assets in the event of death. There is a difference between insurance that protects you versus insurance that protects your lender.
A PMI (Private Mortgage Insurance) is a type of insurance that protects lenders in the event of a borrower defaulting on their mortgage. It is typically required when the down payment on a home is less than 20% of the purchase price. The borrower pays the premium for PMI, which can be added to the monthly mortgage payment.
A Mortgage Protection Plan, on the other hand, is a type of insurance policy that pays off the mortgage in the event of the borrower’s death, disability, or job loss. This type of insurance is designed to protect the borrower’s family from having to pay off the mortgage in the event of unexpected financial hardship. The premium for a Mortgage Protection Plan is separate from the mortgage payment and is paid by the borrower.
In short, PMI is a type of insurance to protect the lender, while a Mortgage Protection Plan is a type of insurance to protect the borrower and their family.
