You need to understand how insurance works to understand how MIGs work.(posted 8268 days ago)The MIG is bought by you, on behalf of the lender, to protect them against you failing to pay back the mortgage. It's insurance, but it's insurance for the LENDER, not for you.
With insurance, if the insurer pays out a claim, and can point at a person/persons/organisation who is responsible for them having to pay out they are legally entitled to pursue that person (or whatever) for the amount they've paid (plus costs).
If you take car insurance as an analogy:
Let's say I'm in my car and you drive into the back of me. It's obviously your fault, so my insurer (I have fully comp.) pay to have my car fixed. Now, it's your fault, so they come after you for the amount owed. If you have YOUR OWN insurance, then your insurance company settles, but if you're uninsured then you are PERSONALLY responsible for this amount of money. (and what you did was illegal too, but I'll ignore that as it isn't relevant)
So far, so good - where MIGs got such a bad press (and deservedly so) is that they were sold as protection for the PURCHASER - it was never made clear that you would STILL be liable for the debt if the mortgage company claimed for some reason.
I hope that's made things clear. Whether it's right or wrong is another matter, but them's the facts.