Thinking Twice About Mortgage Life Insurance
Naturally as the primary wage earner for your family, you wonder from time to time whether, in the event your premature passing away, your family would be able to shoulder the burden of your home mortgage payments each month. You’ve heard that a mortgage life insurance policy might be a good way to protect your heirs from this unfortunate possibility. After all, it does pay off your mortgage in the event of your death. But did you know that many experts don’t think it is the best way to give your family protection from losing the family home in the event that they lose their breadwinner? I’ll explain why, and I will also let you in on a secret as to where you should definitely not buy mortgage insurance.
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.
The best course of action to take is probably to buy a return of premium term life insurance policy instead of mortgage life insurance. Buy the term policy for the same length of time you have left to pay on your mortgage, i.e. 15, 20, or 30 years or whatever amount of time it is. Since it is likely statistically that you are going to outlive your term life policy, you will get your premiums back without tax liability. A further note: “mortgage term life” is similar to mortgage insurance, and it may seem more attractive as it is cheaper, but the problem with this policy is that if you do not die within the term there will be any benefit paid and your mortgage will also not get paid off.
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.
In closing, a lot of experts would encourage you to substitute an appropriate term life policy in line with the overall length of your mortgage instead of what at first glance might seem to be the most convenient option – mortgage life insurance.
To find out more about mortgage life insurance, visit Reginald Gregory’s site on how to choose the best life insurance.