Should I Get Mortgage Life Insurance?

If you’re looking into purchasing a home and financing that purchase with a mortgage, the odds are that your bank or lender has mentioned mortgage life insurance to you. Mortgage life insurance is a type of life insurance that kicks in upon your death and pays off the rest of your mortgage. The idea behind mortgage life insurance is that when you die, you don’t want to burden your loved ones with the financial burden of mortgage payments. Although your lender may be pushing you to buy mortgage life insurance, you should be aware of the fact that mortgage life insurance is totally optional.

If you decide that mortgage life insurance is not for you, then make sure to inform your lender that you don’t want it. If the lender insists that they will not give you a mortgage without this insurance, then report them to the Federal Trade Commission because what they’re doing is illegal. Mortgage life insurance should not be confused with private mortgage insurance. Private mortgage insurance is a type of insurance that your lender will require you to purchase if your down payment is worth less than 20% of the total value of your home.

Many people feel that mortgage life insurance is a bad investment for several reasons. One reason is because although your premiums remain level over the years, the amount of money required to pay off your mortgage decreases. For example, if you’ve been faithfully paying off your mortgage for decades and only have $5,000 to go when you die, your mortgage life insurance policy will only pay $5,000. It doesn’t matter that you’ve paid the insurance company way more than $5,000 over the years – that’s all they’re obligated to pay out.

Another reason why mortgage life insurance is a bad idea is because it is designed to serve the best interests of the bank and not the insuree. If the breadwinner of the family dies and the income dries up, the odds are high that the family will default on the mortgage payments. A default on the mortgage payments would cause the bank to lose money, but not necessarily the family.

A third reason as to why you shouldn’t buy mortgage life insurance is because it’s very expensive. Sure, when you break it down, it’s only a few cents per day, but when you compare the costs to the actual expected payout, it’s simply not worth it. You would have to die within the first year of owning your home in order to get a worthwhile payout. If you’re looking for some kind of mortgage insurance, your best bet is to go with term life insurance. For most people, it’s more worthwhile for them to increase the amount of coverage under a life insurance policy than to go out and buy mortgage life insurance.

Should I Consider Buying Mortgage Life and Disability Insurance?

Mortgage life insurance goes hand in hand with disability insurance, as they both are used to make sure that you can keep your home should there be a crisis. Mortgage life insurance will allow your loved ones to be able to keep your house should you pass away, offering them a better future. Disability insurance, on the other hand allows you to continue to pay for your home if you should become disabled and unable to continue working, which would greatly diminish your household’s income.

Mortgage Life Insurance

This type of insurance is used to pay for your mortgage should you suddenly pass away. This will keep the burden off of your family and will eliminate the need for them to choose between paying the mortgage or letting go of the house. The amount you have to pay decreases as your total mortgage decreases, so your payments are relative to the amount of money the insurance company would have to pay if you died.

You also have a second option with this type of insurance. Instead, if you have a set time in which your mortgage will be paid off, let’s say twenty years, then you would have to pay a set amounts for those twenty years. Unfortunately, that amount would not decrease as your mortgage increased and you will end up paying more than your mortgage is worth by the end of it. This is why most people like to go with the first policy, even though it costs more than your mortgage as well, it doesn’t cost as much and it decreases over time.

Disability Insurance

Mortgage disability insurance is meant to help you pay your mortgage should you become temporarily injured or severely disabled. If you did not receive worker’s compensation for becoming injured, which usually occurs because of an injury that is not work related, then you will not have money to pay your mortgage. This could cause you to lose your home, which would be devastating. Instead, during your time off of work, your insurance kicks in and begins to pay your mortgage. This allows you to keep your home and prevents you from being unable to pay for it. Sadly, hundreds of people lose their home each year due to a disability that causes them to be unable to pay for their home. This insurance will help you prepare for the future so that you don’t become one of those statistics, which could happen with just one accident.

While these two types of insurance should be in a single policy, they are not. The need to buy either policy changes from person to person, but either policy could end up saving your home. These policies are meant to prepare you for the future, but can be difficult to pay for. In our rough economy, not everyone can afford to pay for one of these policies, but if something bad were to happen they definitely would not be able to pay for the crisis. It is a risk, an expensive one at that.