What Does Mortgage Insurance Policy Mean?
A mortgage insurance policy is an insurance product that protects a mortgage lender in case the borrower defaults on loan repayment, dies, or is unable to fulfill their loan obligation for whatever reason. It may refer to mortgage life insurance, mortgage title insurance, or private mortgage insurance (PMI). Homeowners who cannot pay a down payment of at least 20% are often required to purchase PMI.
Insuranceopedia Explains Mortgage Insurance Policy
Mortgage insurance premiums are usually paid monthly, although some lenders collect the entire premium upon release of the loan to the borrower. The coverage may be a decreasing amount, with the original loan as the starting coverage and decreasing as amortization is paid, or a level amount based on the original loan. In case of the borrower’s death, the lender receives the full liquidation of the loan from the insurance company; any excess shall be paid to the insured’s beneficiary.