Mortgage Life Insurance Pros And Cons
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.
When it comes to protecting your family, more has to be better, right? Remember though, that your mortgage payment is only a small fraction of your monthly expenses. Another way to approach it is to look at how much total income they would have to replace to maintain their standard of living if you were gone, and then buying enough insurance to meet that need. The fact is that paying off the mortgage entirely might not even be the smartest thing to do financially- what if your family wanted to sell the house? At any rate, putting funds from an insurance payout towards other expenses might make more sense. Mortgage life insurance would remove some flexibility in this case. Paying the same premiums into a term life policy would restore that flexibility.
Rather than purchasing mortgage life insurance cover, really consider purchasing a return of premium term life policy. The policy can be purchased for the same term as the mortgage itself such as 20, 25 and 30 year plans. If you outlive the term policy, which statistically is likely, you get all your premiums back, without a tax liability. By the way, 'mortgage term life' insurance is something different altogether: it is like MI, and is sold as a cheaper alternative to it, but if you do not die within a given time, NO benefit is paid and the mortgage is not paid off either. Buyer beware.
I promised to let you know where you should not buy mortgage insurance, assuming you still want it. That place turns out to be the bank from which you take out a mortgage loan. They are very likely to offer it to you but there are a few reasons why you should turn it down, not the least of which is because they will charge you a premium for the "convenience".
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. - 16931
When it comes to protecting your family, more has to be better, right? Remember though, that your mortgage payment is only a small fraction of your monthly expenses. Another way to approach it is to look at how much total income they would have to replace to maintain their standard of living if you were gone, and then buying enough insurance to meet that need. The fact is that paying off the mortgage entirely might not even be the smartest thing to do financially- what if your family wanted to sell the house? At any rate, putting funds from an insurance payout towards other expenses might make more sense. Mortgage life insurance would remove some flexibility in this case. Paying the same premiums into a term life policy would restore that flexibility.
Rather than purchasing mortgage life insurance cover, really consider purchasing a return of premium term life policy. The policy can be purchased for the same term as the mortgage itself such as 20, 25 and 30 year plans. If you outlive the term policy, which statistically is likely, you get all your premiums back, without a tax liability. By the way, 'mortgage term life' insurance is something different altogether: it is like MI, and is sold as a cheaper alternative to it, but if you do not die within a given time, NO benefit is paid and the mortgage is not paid off either. Buyer beware.
I promised to let you know where you should not buy mortgage insurance, assuming you still want it. That place turns out to be the bank from which you take out a mortgage loan. They are very likely to offer it to you but there are a few reasons why you should turn it down, not the least of which is because they will charge you a premium for the "convenience".
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. - 16931
About the Author:
To find out more about mortgage life insurance, visit Reginald Gregory's site on how to choose the best life insurance.
posted by Edgar at
03:53
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