Posts Tagged ‘Life Insurance’

PMI vs MIP vs MPI… What is the difference?

May 17, 2017

Lots of acronyms there. What do they all mean?

Many people are familiar with the term “PMI” or Private Mortgage Insurance. This is insurance the borrower pays on behalf of the lender in case of a mortgage default. The insurance protects the lender and becomes a requirement when purchasing a home with less than a 20% down payment (or refinancing with less than 20% equity in the home).

MIP stands for Mortgage Insurance Premium and is completely the same thing as PMI, but that is what mortgage insurance is called on FHA loans.

So what is MPI? That stands for Mortgage Protection Insurance. When buying or refinancing a home, the home owner will get plenty of these offers in the mail in the weeks/months after buying a home. Why? Companies pay people to search through newly recorded deeds at the county. This is legal since the deed is a matter of public record. With the deed information, a company knows your name, your new home address, and who did your loan. The offers for Mortgage Protection Insurance will come regularly in the mail, and these companies make it look like the letter is from your mortgage company. They can be sneaky with these letters.

What does MPI do? If you choose this option, MPI will pay the loan balance off for a borrower in the event of their death. Sounds good, but let’s dig a little deeper. The premiums for this insurance are typically significantly higher thank those for life insurance as they require minimal to no medical examination or health screening. Anyone in any health condition can get this insurance by paying the monthly premiums. The other downside is that as mortgage payments are made, the principal balance of their loan reduces. This means the payout in the event of the borrower’s death reduces… in other words, the premiums stay the same, but the death benefit decreases every month.

MPI is a fantastic option for someone who cannot, for whatever reason, qualify for term life insurance. If you can get term life insurance, it is the better way to go. Typically, people can get more coverage that doesn’t diminish each month for a lower monthly premium.

Just bought your first home and don’t have life insurance? Or maybe you’ve owned your home for a few years, but your family has grown since you last looked at your life insurance coverage. Regardless of your need, my friends at the Sheldon Baker Group can assist you in getting free quotes from the top carriers in the life insurance industry. You can check out the Sheldon Baker Group life insurance page here. You can also call 678-793-2322 or email to sheldon@sheldonbakergroup.com.

Whether you use my friends at the Sheldon Baker Group or someone else, life insurance is important as you own a home and/or have a growing family. Use the MPI offers in the mail as a reminder to evaluate your coverage.

 

I just bought a home and I can’t figure out what insurance I have and what insurance I NEED! Can anyone help me?!

April 23, 2010

I just bought a home and I can’t figure out what insurance I have and what insurance I NEED! Can anyone help me?!

When buying a new home, many homeowners have questions around insurance. Some questions I hear are: What is PMI and does it protect me? Should I buy mortgage life insurance or life insurance not tied to the mortgage? Is term or permanent insurance better for me? The 3 types of insurance I’ll talk about are 1) Private Mortgage Insurance (PMI), 2) Mortgage Life Insurance and 3) Life Insurance (this can be either term or permanent coverage). The best way to start is by understanding the purpose of each.

Private Mortgage Insurance (PMI)

PMI is insurance that lenders require most homebuyers to purchase who obtain loans that are more than 80% percent of their new home’s value. PMI has no connection to any kind of life insurance and pays no benefit to the borrower. This insurance is to offset losses in the case where a homeowner is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. Rates typically are $55/mo. per $100,000 financed, or as high as $1,500/yr. for a typical $200,000 mortgage.1

Mortgage life insurance

Here, you’re being offered the chance to buy an insurance policy that will repay your mortgage in the event of your death, disability or some incapacitating disease. Usually, homebuyers receive offers by mail from your lender or an insurance company affiliated with that particular lender. The question is often asked, should I buy this type of insurance? Often, home buyers come to a conclusion that paying off the mortgage is not the only need for cash their family will have and look towards a broader approach.

For example, you’re much better off analyzing your overall insurance need based on a Personal Needs Analysis “PNA” that answers questions such as: How much income would my spouse need if I died too soon? How much money would it take for my spouse to pay off the mortgage and any other debt if I died today? How much will the education we’ve planned for our kids cost? How much money do we need to retire? Ratio’s may be 12 to 20 times or more of life insurance compared to annual income. The right number is derived by thorough discussion and calculations of the answers to these and other questions.

Life Insurance

Daily, I help clients answer their questions around life insurance. Before asking Term or Permanent (also known as Whole Life or Cash Value Life), it is most important to determine the right amount of insurance. Once you know the right amount, then the question of term versus perm comes into play. Many times, the answer is “both” are appropriate in some combination. Term premiums are lower and often compared to “renting” since it has no cash value. On the other hand, permanent insurance premiums are more of a financial commitment, but build up cash value that be used while you are alive. My counsel is to ask for assistance from a Financial Advisor you trust or comes highly recommended to do a Personal Needs Analysis to determine what the right amount and the right mix is for you and your family. If you live in the Atlanta area and want great advice about your financial security, call me!

1 Rates according to www.gobankingrates.com

Brent R. Burke, CLU is a Financial Advisor with Northwestern Mutual and specializes in helping families, business owners, executives and physicians map out their Financial Security.

Brent R. Burke,CLU

Financial Advisor

5445 Triangle Pkwy

Suite 325

Norcross, GA 30092

(770) 246-8359 office

(770) 246-8353 fax

(678) 644-7600 cellular

brent.burke@nmfn.com

www.brentburke.com

Northwestern Mutual Financial Network (NMFN) is the marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries and affiliates. Brent R. Burke is an Insurance Agent of NM (life insurance, annuities and disability income insurance) and Northwestern Long Term Care Insurance Company,

Milwaukee, WI, a subsidiary of NM (long-term care insurance). Registered Representative and Investment Adviser Representative of Northwestern Mutual Investment Services, LLC, , 950 E. Paces Ferry Rd., Suite 2300 Atlanta, GA 30326 404-846-3000, a wholly-owned company of NM, broker-dealer, registered investment adviser and member FINRA and SIPC. NM Goodwin, Wright are not broker-dealers or registered investment advisers. Brent R. Burke is not a broker-dealer or registered investment adviser. There may be instances when this agent represents insurance companies in addition to NM or its affiliates.

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