Homeowner’s Detailed Guide to Mortgage Redemption Insurance
Published on: September 15, 2020 . Last updated: September 18, 2020 Category: Personal Finance
Owning a home is one of many Filipinos greatest dreams. It’s a worthwhile investment not only for you but also for your family. However, not everyone can buy a home in full, especially now that house prices in the Philippines continue to increase. As a result, many take on housing loans to purchase their dream home. It’s the most recommended, if not the best, financing option for buying a new house or renovating a property.
But what happens when the borrower dies and the mortgage is still unpaid? This is where Mortgage Redemption Insurance (MRI) comes in. Having this kind of insurance ensures that your outstanding mortgage debt is paid in the unfortunate event of death or total disability. Learn more about Mortgage Redemption Insurance in housing loans below.
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What is Mortgage Redemption Insurance?
Mortgage Redemption Insurance is a life insurance policy that helps repay your mortgage balance in the event of your death before the housing loan’s full repayment. MRI is designed to protect your home from foreclosure as it will take out your outstanding debt if you die.
Just like any other insurance policy, MRI covers a set amount and duration. It dictates how much of your mortgage can be covered and for how long. The higher your premium is, the better your coverage will be.
However, keep in mind that just because you have an MRI doesn’t mean your outstanding housing loan balance will be paid in full. It will still depend on the kind of coverage you have. If you chose an MRI with the cheapest premium, the coverage would be minimal as well.
What is MRI in Housing Loans?
MRI is typically a requirement when applying for a housing loan in the Philippines. Your bank will ask you to get this policy as part of the borrowing process. If you have life insurance, you can use this as your MRI, too. Instead of having your home foreclosed due to surviving family members who cannot pay the loan, MRI ensures that your housing loan is taken care of. While many hesitate to get an MRI because of its hefty premiums, this may save your loved ones from drowning in debt or losing the home you worked hard for.
MRI Versus Other Life Insurance Products
Just like other life insurance policies, MRI gives you and your family financial security should an unexpected tragedy happen, like a terminal illness, disability, or even death. While life insurance products may cover hospitalization, burial and funeral expenses, and education, they don’t cover the mortgage—the biggest expense that the breadwinner may leave should they pass.
Life insurance may provide financial assistance to the remaining family members until they can recover. However, the payout may not be enough to cover the household’s monthly mortgage payments. This is why MRI is becoming more important than ever for home buyers. This particular policy ensures that your legacy, in the form of your dream home, continues to benefit your loved ones even after your passing.
However, you can use your existing life insurance as an MRI. Your policy may cover your outstanding home loan amount, giving your family an extra helping hand during trying times. Talk to your insurance provider to know more about using your current policy as an MRI.
MRI Versus Other Home Insurance Products
Mortgage Redemption Insurance is only one of the many insurance policies you can get to protect your home and your family. However, MRI doesn’t cover any damages that may occur to your property. This policy ONLY covers your home loan payments in the event of your passing or disability.
The following are insurance types that can protect your property from fire, theft, natural disaster, and other accidents:
- Property insurance – helps protect your home from an unexpected natural disaster like earthquake, fire, storm, and volcanic eruption.
- Home insurance – helps protect your home from financial losses due to theft, vandalism, and other damages.
- Contents insurance – protects the contents of your house from theft, burglary, and other damages.
How Much is MRI in the Philippines?
The price of a mortgage redemption insurance policy varies and typically depends on the amount of your home loan and your chosen insurance provider. In general, your lender may require you to get an MRI coverage equal to the amount you are borrowing for a mortgage. Your premium is based on this coverage.
For example, if you are applying for a PHP 2 million home loan, your lender will require you to get an MRI that covers this amount. However, this coverage will decrease annually, based on a pre-determined decreasing balance of your mortgage.
How Do I Apply for MRI?
If you’re applying for a home loan, getting an MRI is typically part of the process. You may be required to pay your MRI premium all at once, instead of paying monthly fees throughout the duration of your policy.
As mentioned, if you already have existing life insurance this can be assigned as your MRI. However, you have to put your home loan lender as the beneficiary of the policy, instead of your family. You will then have to present your policy to your lender, proving that there are enough funds to pay your mortgage.
However, if you don’t have an insurance policy, your lender will ask you to get one, as part of your mortgage application.
Where to Get Mortgage Redemption Insurance
Below are some of the mortgage redemption insurance providers in the Philippines:
- BenLife 
- Country Bankers Life Insurance Corporation 
- PAG-IBIG Fund 
- Paramount Life and General Insurance 
- Sun Life Insurance 
Related article: How Mortgage Brokers Can Help You Secure a Home Loan
Just like any other investment, you should protect your dream house with insurance. It may come with hefty premiums but a mortgage redemption insurance policy ensures that your debt will be taken care. You’ll have peace of mind, knowing your family will have the financial assistance to pay off your mortgage during difficult times.
-  The Philippines’ housing market is now two-tiered (Delmendo, Global Property Guide, 2020)
-  BenLife MRI Plans
-  Country Bankers Life Insurance Corporation MRI
-  Pag-IBIG Fund Official Website
-  Paramount Life & General Insurance Group Mortgage Redemption
-  Sun Life Creditor’s Group Life
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