Fully eliminating use of account passwords can be problematic - even when using two factor authentication.
Are you intending to use the native Mail App, or other third-party Mail client with your iPad?
Assuming that you intend to use the Apple Mail App, when adding an email account using the Add Account wizard, your iPad will automagically select the most appropriate mail settings and authentication method for the chosen email provider.
In common with many other Mail providers, Microsoft Outlook and Hotmail accounts now use App Specific Passwords to access IMAP or POP3 mailboxes from (in this case non-Microsoft) mail Apps.
The Mail App on each of your devices, such as your iPad, requires a unique password to be generated from within the Microsoft account. To do so, you’ll need to sign-in to your Microsoft account from a we-browser. Note that the system generated App Specific password will intentionally differ from your Microsoft account password - and can only be used to access your Microsoft mail.
More information about Microsoft’s App Specific Passwords can be found here:
https://support.microsoft.com/en-us/account-billing/using-app-passwords-with-apps-that-don-t-support-two-step-verification-5896ed9b-4263-e681-128a-a6f2979a7944
If you instead to intend to use the Microsoft Outlook App, you will likely find that you will be able use the Microsoft Authenticator App integration.