Buying a home is a significant milestone that signifies stability, success, and a long-term financial commitment. Along with the excitement, new responsibilities also arise, such as mortgage repayments, property taxes, and upkeep costs. Mortgage insurance helps ensure these responsibilities don’t fall heavily on your loved ones if unforeseen circumstances arise. In this blog, we’ll explore what mortgage insurance means, how much it actually costs, how term insurance can complement it, and the key differences between the two.
Key Takeaways
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Mortgage insurance is a type of protection that safeguards the lender or financial institution if the borrower is unable to repay the home loan due to death, disability, or loss of income. In simple terms, it ensures that the lender recovers the loan amount even if the borrower is unable to meet their repayment obligations. Now, let's discuss the types of mortgage insurance, which are as follows:
Mortgage Protection Insurance (MPI): Covers outstanding home loans if the borrower passes away, becomes permanently disabled, or is diagnosed with a critical illness
Lender’s Mortgage Insurance: Protects the lender by ensuring loan repayment when the borrower cannot meet home loan obligations
Group Mortgage Insurance: Offers lower-premium coverage to all home loan customers through bank-insurer group schemes
Term Insurance Linked with Home Loan: Offers a term plan that matches the loan amount, enabling families to repay the mortgage in the event of the borrower’s death
The mortgage insurance cost depends on several financial and property-related factors. Below are the major factors that influence the costs:
As of November 2025, the 30-year fixed mortgage rate averages around 6.16%, while 15-year loans stand at approximately 5.61%
Source: Economic Times
Pairing a term life insurance plan with a mortgage protection strategy ensures long-term financial security. A term plan with a death benefit equal to or greater than the remaining home loan balance can help the borrower’s family repay the mortgage while maintaining their overall financial stability.
Here are some key considerations when combining the two:
Both term insurance and mortgage insurance provide valuable financial protection, but differ in purpose, ownership, and benefits. The table below highlights the key distinctions to help borrowers choose the right option for their financial and home protection needs.
| Feature | Term Insurance | Mortgage Insurance |
|---|---|---|
| Purpose | Provides financial protection to the family in case of the policyholder’s death | Covers the lender’s risk by repaying the outstanding home loan if the borrower dies |
| Beneficiary | The payout goes to the policyholder’s nominee or family | The insurer pays the outstanding loan directly to the lender |
| Coverage Amount | Choose based on the policyholder’s income, dependents, and goals | Limited to the remaining balance of the home loan |
| Coverage Flexibility | Offers fixed or increasing cover options | Coverage reduces as the loan balance decreases |
| Premium Cost | Generally lower for higher coverage amounts | Often higher, as it directly depends on loan size and risk |
| Policy Ownership | Fully owned by the policyholder and transferable | Typically tied to the loan and linked with the lender |
| Tenure | Remains active for the full chosen policy term | Ends when the home loan is completely repaid |
| Benefit Type | Provides comprehensive financial protection beyond the loan | Offers limited protection focused only on the home loan liability |
| Continuity After Loan Repayment | Continues even after loan repayment, ensuring ongoing protection | Terminates once the mortgage is cleared |
| Best Suited For | Individuals seeking long-term financial and family protection | Borrowers want coverage solely for their home loan repayment |
Mortgage insurance provides essential financial protection that benefits both lenders and borrowers. It not only reduces the lender’s exposure to risk but also makes home ownership more achievable and secure for borrowers. Here are the key benefits of opting for a mortgage insurance plan.
Mortgage insurance plays a vital role in safeguarding both lenders and borrowers, ensuring that home ownership remains secure even in unforeseen circumstances. However, its protection is limited to loan repayment. Pairing mortgage insurance with a comprehensive term life insurance plan offers a balanced strategy, protecting the home while securing the family’s broader financial future. At Canara HSBC Life Insurance, we provide flexible term plan options with customisable coverage, add-on benefits, and payout choices tailored to your financial goals. Evaluating one’s income, liabilities, and long-term goals before choosing between the two helps create a stronger financial safety net. It ensures complete peace of mind for the borrower and their loved ones.
Mortgage insurance cost depends on factors such as the loan-to-value ratio, loan amount, credit score, property location, and repayment term. A higher loan amount or lower credit score usually leads to a higher mortgage insurance cost.
You can lower your mortgage insurance cost by improving your credit score, opting for a larger down payment, or choosing a split-premium payment structure. Maintaining consistent repayments also helps reduce your long-term premium burden.
Mortgage insurance is not mandatory for every loan. However, lenders may require it if the down payment is low or the borrower’s credit score is moderate. It helps protect the lender from financial loss in case of loan default.
Yes, borrowers can typically cancel mortgage insurance once they have built sufficient equity in their home. It’s best to check with your lender about eligibility and the process.
Mortgage insurance covers only the outstanding loan balance, ensuring the lender is repaid if the borrower passes away. In contrast, term insurance provides a broader financial safety net for the family, covering all expenses beyond just the loan repayment.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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