Mortgage Life Insurance Pros And Cons

By Reginald Gregory

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.

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 mortgage insurance still seems like something you want, the financial institution that you don't want to buy from is the bank that provided your mortgage loan. Probably the biggest reason why this is the case is that you can be pretty sure that they will try to overcharge you because of the one-stop shopping convenience of it.

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. - 31384

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