Pros & Cons of Mortgage Life Insurance

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Is mortgage life insurance really a good investment?

Some people think it is and buy mortgage life insurance to protect the mortgage on their home.

It’s offered through the banks or other lenders when you are buying a home and apply for a mortgage.  But, did you know that mortgage insurance has a number of different disadvantages you might not know about?

There is a better alternative that has plenty of more benefits and can actually save you money as well.

What is Mortgage Insurance?

Mortgage insurance is generally offered by a mortgage lender such as the bank.  This product is not issued by the bank but rather through them and is a policy offered by an insurance company.

Many people buy mortgage insurance on the premise that it sounds like a good idea.  If something happens to you then the mortgage is paid for and you are protected.

In many instances the mortgage insurance policy is relatively easy to obtain as many of these policies do not require that you take a medical exam.  Others require that you do.

Why Mortgage Insurance is NOT a Good Buy

There are several reasons why mortgage insurance is not a worthwhile investment and for the following reasons:

1. The Policy is Not Beneficial

Mortgage insurance is a form of decreasing term life insurance.  This means that as your mortgage diminishes, then the amount on your policy also diminishes.  You continue to pay the same premium throughout the lifespan of the policy until at least about 80% of the mortgage is paid down.

2. The Beneficiary

The beneficiary to a mortgage life insurance policy is the bank, not you.  You’re paying for a life insurance policy that gives you no control whatsoever.

3. Mortgage Life Insurance is Expensive

Mortgage life insurance is often provided without a medical exam being required.  Any type of life insurance policy which does not require a medical exam is always more expensive than one which requires a medical exam.

The reason why mortgage life insurance policy is more expensive is because the insurance company is taking more of a risk to insure because they have less medical information on you than they would have with a medical exam.

4. Fine Print

These policies have a lot more fine print in them and there have been plenty of horror stories of people trying to collect on a policy only to find they have been turned down because of some exclusion that was written into the policy.  The bank won’t help you either because they can’t and probably don’t really care anyway.

Term Life Insurance Better Alternative to Mortgage Life Insurance

You want your mortgage to be protected, so is there a better alternative?

The answer is yes and it can be found with a term life insurance policy.  Let’s take a look at the advantages you can get if bought a term life insurance policy instead.

Benefits of a Term Life Insurance Policy

1. Fixed Level of Benefits

With mortgage life insurance, the amount of coverage decreases.  With a term life insurance policy the death benefits you buy remains constant until the term expires.  It gives you full coverage so it provides better overall financial protection for your family.  Even though you are paying the mortgage down, the difference in potential insurance proceeds gives your family added financial security in the long run as you age.continue page 2……