One of the worst fears of homeowners is not being able to make mortgage payments due to loss of income and ultimately losing their homes. Mortgage Payment Protection Insurance (MPPI) will cover the cost of your mortgage payments for a limited period of time (usually one year), if you are unable to work due to accident, sickness or unemployment. You should understand the difference between Income Protection (accident, sickness or unemployment) insurance and Mortgage Payment Protection Insurance (MPPI). While income protection replaces a portion of your income during the period you are off work, mortgage protection insurance (MPPI) is tied to the debt (mortgage).
It is important for homeowners to understand the difference between Mortgage Payment Protection Insurance and Mortgage Indemnity Insurance. Most mortgage lenders insist that borrowers buy mortgage indemnity insurance at the time of loan disbursement. Mortgage Indemnity Insurance protects the lender if the homeowner is unable to make mortgage payments either due to death or unemployment. You should understand that Mortgage Indemnity Insurance policy favours the lender. If you fall behind on your mortgage payments the lender can repossess your home and sell it, even if you bought Mortgage Indemnity Insurance. The insurance policy will indemnify the mortgage lender for any loss between the loan amount and the value. Mortgage Payment Protection Insurance, on the other hand, protects the homeowner during the period he or she is unemployed and unable to make mortgage payments.