Mortgage Insurance Policy
What Does Mortgage Insurance Policy Mean?
A mortgage insurance policy is an insurance product that protects the lender if the borrower defaults on loan repayments, dies, or becomes unable to meet their loan obligations for any reason. This may refer to mortgage life insurance, mortgage title insurance, or private mortgage insurance (PMI). Homeowners who cannot make a down payment of at least 20% are often required to purchase PMI.
Insuranceopedia Explains Mortgage Insurance Policy
Mortgage insurance premiums are typically paid monthly, although some lenders may collect the entire premium when the loan is issued to the borrower. The coverage may decrease over time, starting with the original loan amount and reducing as the loan is amortized, or it may remain level, based on the original loan amount. In the event of the borrower’s death, the lender receives full repayment of the loan from the insurance company, with any excess paid to the borrower’s beneficiary.
