- Should you purchase mortgage life insurance?
- June 3, 2015
Mortgage life insurance is not the same as life insurance. It benefits the mortgage company and decreases in value as your mortgage payments go down. The beneficiary of the policy is the mortgage company so your spouse or children do not have the advantage to use the death benefit.
Some people have little family are in poor health and feel that mortgage insurance is the best they can do since they probably cannot qualify for life insurance and it is convenient without a beneficiary. However, your premiums stay the same and your benefit declines as it is always decreasing in the process of paying off your mortgage. Remember this can only be used for your mortgage and the payment is added to your home loan. If your mortgage payment is high, mortgage life insurance is added to your payment.
By having a separate policy, and naming your beneficiary (someone other than the mortgage company), you also remove the policy from your estate for Estate Tax purposes. This can save tens (or hundreds) of thousands of dollars in Estate Tax liability.
Most industry specialists suggest insurance that will pay for a variety of expenses and that is a traditional life insurance policy. Many who buy mortgage insurance are pushed by their banks and feel like they can’t get anything else because of age, weight and or health issues. Life insurance is not impossible if you are older and have health conditions. A guaranteed life policy, for example, for those who are ill is the best option because it does not require a medical exam and very few health questions are asked. It can then cover your mortgage and other bills. The following are the basic health questions for a guaranteed life:
- Are you terminally ill?
- Do you reside in a long-term care facility?
- Do you have AIDS or HIV
Guaranteed issue life insurance may be more expensive than a term policy, so if you are in good health, a term life insurance is affordable to extend beyond just your mortgage payment and will cover additional expenses so you are getting a better deal for your policy. A guaranteed issue policy or term life insurance policy is a much better way to handle your expenses after you are gone. A trusted life insurance agent can help you decide what is the best for your situation.
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