Mortgage Redemption Insurance or MRI is a type of Life Insurance required by Banks and other Lending Institutions when you apply for a Home Loan. An MRI pays off the outstanding mortgage balance of the borrower in case of his or her death or total disability.
While there are those who do not see the need for an MRI, as it supposedly just adds to the money that needs to be shelled out. The purpose of an MRI is two-fold: First, it protects the bank – the MRI guarantees that the bank will be paid back the amount that was lent out. Therefore, the bank or lender does not have to sequester the house from the borrower’s surviving family. Secondly, it protects the borrower’s surviving family – the MRI helps settle the outstanding house loan amount so that the borrower’s surviving family does not have to worry about how to pay off the outstanding loan amount.
Whenever you make a significant investment, you need to protect it via insurance. To be clear, MRI is not like fire insurance which is typically an add-on to your property insurance, or insurance that includes protection from Acts-of-God. Hopefully, You now have a better understanding of MRI and how it is different from fire insurance.