The term Private Mortgage Insurance (PMI) means insurance that the buyer purchases for the benefit of the lender. If you borrow more than 20% on the value of your home, then your lender will ask you to carry a PMI policy. The policy pays to the lender the principal balance of your note if you default on the note and the property goes into foreclosure. If you pass away, your outstanding balance is not paid by PMI.
Private Mortgage Insurance is an insurance that is required when a lender views you as a higher risk. Your lender will require you to carry this insurance if you have not put at least 20% down payment on the home you want to finance. The lender who requires you to carry PMI does so because the risk of loaning you money decreases with PMI. PMI will step in to pay the balance of the principal on the note when and if you default on your payments and the property is foreclosed. You will have to carry PMI until you have paid in the requisite 20% to equity in your property. At that time you can request that the lender release you from your responsibility to carry the PMI. The PMI will cease automatically when you reach the 78% threshold.
Mortgage Protection Insurance (MPI) differs from PMI in that you, the borrower, benefit from the policy that you pay for. This insurance is insurance that is payable upon your death. If you work in an occupation with a higher than normal risk of death or you have a family history that leads you to believe that you will have a shorter life span, you may want to carry this insurance to protect your family from losing the home if you die before satisfying the debt. The policies and the fees are different. You will need to speak with an agent who sells this insurance to find the policy that best meets your needs. You will need to pay a monthly premium for the insurance. This insurance will be a set premium but the value will fall as the balance you owe on your mortgage decreases. If you want insurance coverage for a specified amount that will not decrease with the principal of the loan you will need to buy life insurance.
Life insurance is a policy that you pay a set premium amount and you get a specified amount of coverage. This insurance is payable on your death. This insurance will be cheaper than mortgage insurance and it will not decrease in value as your principal is paid down. Life insurance can be purchased as a term insurance policy. This means the insurance will cover you for a specific amount of time. You can purchase a five year up to a thirty year term. Permanent life insurance is known as whole life insurance or universal life insurance and will cover you for a life time. If you want to get the best possible benefit and get a benefit that is specific to your needs be sure to speak with an agent who can help you select the coverage which is best for you.
If you want an insurance policy that will pay if you become unemployed or disabled speak with your agent. There are insurance policies that you can buy that will provide this type coverage, as well. This type insurance is known as long-term disability insurance or accidental death and dismemberment insurance. The disability must be long term and permanent in nature for you to qualify for the benefits.