Will a family have trouble paying off their mortgage on their home if they lose the income of their primary earner? The mortgage protection offered by a mortgage life insurance policy does away with this threat because it guarantees to pay off the outstanding amount on your mortgage if you die. Sounds like a good idea doesn’t it? However in this brief article I can explain to you why there might be better strategies that you can use to make sure that your loved ones have their financial needs taken care of in the event of your passing. If you still think you want a mortgage insurance policy I will also tell you the one place you don’t want to buy it.
Making sure that your family, the people named as beneficiaries on the policy, is of paramount concern to you of course. The thing we have to remember though is that mortgage life insurance won’t solve all the problems that they will have if you were to die prematurely. In all likelihood the mortgage payment for the home is well under one half of the total amount of money that they need each month to preserve their material standard of living. Wouldn’t it be smarter to address in a holistic manner the total overall financial needs of your loved ones? When it comes right down to it, a mortgage payoff may be not at all your family would need the most. What about their other expenses? What if selling the house looked to be the best course of action for them? Paying off the mortgage would not be the best way to use an insurance payout in this case. If you were to buy a good term life insurance policy rather than mortgage life insurance, your family would have a greater flexibility in exactly where they would put the money from the death benefit that you would have paid toward.
A so-called return of premium term life insurance policy is, for many people, an improvement over the purchase of mortgage life insurance. A term policy like this can be had for the same amount of time you have remaining on your mortgage. Something that not everyone knows is that people generally outlive their term insurance policy. With this type of insurance, with the return of premium rider, if you are alive at the end of term premium payments paid back to you. Also be aware that “mortgage term life”, while similar to mortgage insurance and possibly more attractive to you because it is cheaper, is probably not what you want because you surviving the policy will mean that your mortgage is not paid off of course, and no benefit is paid either.
If you still decide that you want mortgage insurance, what is the one place you don’t want to buy it? You will almost certainly be offered it by the bank from which you are taking the mortgage loan, but do yourself a favor and decline it. Get a return of premium term life policy instead, because of the usually higher mortgage life insurance rates, and other reasons.
So again, level term life policies sold by insurance agents and brokers might require a little more effort on your part, but taking advantage of the the ‘convenience’ of mortgage life insurance is probably a bad move when you take a closer look.
Looking for the best deal on mortgage life insurance? Good general advice on life insurance can be found at the preceding links.
Tags: affordable life insurance, finance, insurance, life insurance, mortgage life insurance, personal finance