05/10/2018
Q: What Is Mortgage Redemption Insurance? Why Do Banks Require That I Get One?
A: When applying for a housing loan from a bank, you would be asked to get a mortgage redemption insurance or MRI. An MRI is a form of life insurance that pays off a part or the whole of the insured’s outstanding mortgage balance in case of his or her death or total disability.
Many may oppose shelling out precious pesos for an MRI, as they feel they already have enough payments to deal with. But an MRI in fact protects not just the bank, which the insurance guarantees that it will be paid back the amount it has lent, but also the borrower’s surviving family, as it will help settle the outstanding housing loan amounts. In the absence of an MRI, the bank or lender may sequester the house from the surviving family.
If you have an existing life insurance policy, you can assign your policy as your MRI. If you have none, the bank will require you to get an MRI, which usually will be incorporated to your housing loan in lump-sum payment (one-time premium paid annually).
Other people hesitate getting an MRI as it gives them an extra expense, which by the way is considerable. However, with that single investment, you might be saving your family from wallowing in debt or losing the home you have sought to provide them with.
