The lender in a mortgage agreement. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. A type of term life insurance often bought by borrowers. The amount of coverage decreases as the principal balance declines.
Some policies also cover the borrower in the event of disability.
In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds. In the case of disability insurance, the insurance will make the mortgage payment for a specified amount of time during the disability. Be careful to read the terms of coverage, however, because often the coverage does not start immediately upon the disability, but after a specified period, sometime forty-five days. The borrower in a mortgage agreement.