Mortgage Insurance

There are actually two kinds, and they provide very different types of coverage. First, there is the type known as private mortgage insurance, or PMI as it's known in lending circles. If you are buying a home and putting up a down payment of less than 20 percent of the home's value, then generally you don't have a choice of whether to buy this type of insurance. The lender requires it. It is there to protect the insurer in the event you default on your home loan and the lender isn't able to re-sell your home for enough money to pay off the mortgage. The cost of PMI varies, but a rule of thumb is about one half of one percent of the loan amount.

The second type of mortgage insurance is the type that usually goes by the name “Mortgage life insurance”. Mortgage Payment Protection is a comprehensive insurance policy that covers reasons you may not be able to pay your mortgage during a specified period of time. These circumstances could include accident, disability, illness, or unemployment. Private insurance companies provide this type of Mortgage Insurance. The health standards you must meet to buy one of them is usually much lower than for a regular life insurance policy making this a much easier policy to purchase if you can’t get life insurance.