Mortgages - Information & Tips
Do you really need Mortgage Life Insurance?
Should you say 'No' to your banks mortgage insurance
Before
you sign on the dotted line to purchase Mortgage insurance, think
twice!
While on the surface buying mortgage insurance appears to be a sound decision to protect your loved ones from losing their home in case of death. This may not be financially the ideal way to go if you are really serious about protecting your family and at the same time looking after your financial well being.
In my humble opinion ‘Mortgage Life Insurance’ is a waste of money.
Banks may talk you into getting this insurance, usually not because they are concerned about your well being but to ensure they get their money.
Consider the following:
√ While you pay
the premium for your mortgage life insurance, the bank is
the beneficiary under this policy. In case of death the bank gets
paid.
√ Another factor
is the actual insured amount. Suppose your initial mortgage
insurance is for $300,000 and you are paying a premium of say
$100 per
month. Even though over the years the original mortgage
amount will
gradually decline, your monthly premium will stay the same.
Using the $300,000 mortgage policy example, suppose at the
time of
death the mortgage amount balance was $100,000 then the
amount paid
would be $100,000 and not the $300,000 which was the original
mortgage
insurance value.
√ Mortgage
insurance premiums, as is it with most types of insurance are
set by taking into consideration your age and medical
condition. Suppose
after five years you want to move your mortgage to another
company, you
will have to prequalify yourself again for mortgage insurance
coverage and
incase your health status has changed due to a diagnosed
illness, your
premiums will increase. In the unfortunate
event you suffer a heart
attack there is the possibility you may even be denied
coverage.
So what is the most appropriate option for people who want some protection for their loved ones in case of death.
LIFE INSURANCE is the best alternative when it comes to value for your insurance dollar. However life insurance policies have higher premiums and hence those considering mortgage life insurance do not take this route. The best option for those thinking of getting mortgage life insurance to protect their families is to get TERM INSURANCE.
TERM INSURANCE
Term Insurance is also like a life insurance policy for a fixed term. This type of policy is not tied in with your mortgage. The policy holder owns this type of insurance policy and you specify who the beneficiary is on the policy in case of your death. This policy usually works out to be even cheaper than mortgage life insurance and has other benefits.
