| Why Mortgage Life Insurance Might Not Be A Good Deal |
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| Written by Reginald Gregory |
| Friday, 08 January 2010 18:47 |
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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.
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. You would think that more protection always is better when it comes to your loved ones, would you? But let's look at it in a more practical way. Out of all the money that you pay out each month, the mortgage payment that you make is only a part of it, most likely quite a bit less than one half. Doesn't it make sense to look at how much money your family would need to make sure that their overall living standards do not deteriorate, and in turn get enough insurance to achieve that goal? In the event that they receive an insurance payout, paying off their mortgage, as this form of insurance will do, may very well not be the best financial move to make. For instance, what if they decided that selling the house was the best thing to do? So in this way, having flexibility as to where exactly an insurance payout would go might be smarter. Mortgage life insurance does not provide this sort of flexibility, and there's a good chance that paying monthly premiums toward a term life insurance policy does provide it. 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. 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". The bottom line is that you would be well served to do just a little research and buy yourself a term life policy that fits your overall needs, or the needs of your family in the event of your passing. Mortgage life insurance, while certainly sounding like something you would want, might very well be spending your premium dollars on the wrong policy. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. To find out more about mortgage life insurance, visit Reginald Gregory's site on how to choose the best life insurance. |