Mortgage insurance protection is a form of payment protection insurance (PPI) designed to protect individuals who have taken out a mortgage. A mortgage loan assumes that the buyer is able to make payments each month until the loan is repaid. Homeowners who do not have mortgage insurance protection can lose their homes when payments are not made on time. PPI helps to protect the buyer from unforeseen events that may effect their ability to make mortgage payments, such as illness, job loss, and death.

Mortgages cover the cost of a purchase price for a property. These loans typically require a deposit, otherwise known as a down payment, to cover some of the cost. Repayment of the remainder of the mortgage loan is spread out over a set number of years against a fixed or variable rate of interest. When buyers purchase mortgage insurance protection, payments for this protection will generally be added to mortgage loan payments, increasing the amount of monthly payments.

Mortgage insurance protection ensures that the insurance provider will pay off the loan if the mortgage holder dies. This means anyone who might inherit the property will not inherit debt. Insurers will also pay out if the property is foreclosed upon or if the homebuyer is unable to keep up with payments due to circumstances such as illness or injury. Such payments are often limited to a short period of time — typically 12 months.

Mortgage insurance protection may be easier to obtain than health insurance. It is usually offered on a guaranteed acceptance basis. This means few questions are asked during the application process and there are fewer reasons for rejection. One downside of the application process is that the amount of money someone will pay each month in insurance contributions depends on the size of the mortgage, the age of the buyer, and their health.

Homeowners who save a portion of their earnings regularly may benefit from purchasing mortgage insurance. In the U.S., federal assistance only comes into effect once savings have been used up. This is not the case with mortgage insurance. Insurance payouts help cover costs and prevent an escalation in personal debt.

There are also some disadvantages to mortgage insurance protection. These plans tend to prevent any insurance payouts until at least six months of continuous payments into the program have been completed. Insurance companies may prohibit certain illnesses and pre-existing conditions from being valid reasons for a payout. Furthermore, coverage is often declined for people over the age of 64 and those on temporary or short-term contracts.

Many banks offer mortgage insurance protection but charge more for coverage than independent providers. Insurance adds an additional cost to monthly mortgage payments, so homebuyers must decide whether they can or want to pay for it. Mortgage insurance protection plans should be thoroughly investigated before purchasing.