Take out a mortgage loan and the odds are good that within just a few short weeks of registering the deed with the county, you will begin receiving numerous solicitations for what is termed mortgage life insurance. This protective life insurance for your mortgage is advertised as being a vehicle for ensuring that your family will remain in your home and can pay off the property after your death without having to worry about probate, having bills attached to the value of the policy, and of course giving you and your family a peace of mind in an uncertain world.
So – should you buy protective life insurance for your mortgage or is there more to these solicitations than meet the eye? Here are some facts you need to know!
- The good news about this kind of term care insurance policy comes to light early on when you read through the solicitation and notice that you will not be required to undergo a medical exam. This is good news for those who might have otherwise have been denied life insurance or who simply do not have the time (or wish to make the time) to undergo a medical exam.
- Another advantage of course is the idea that the insurance premiums will lessen as the home’s mortgage is getting paid off. Combine this with the knowledge that your family will be guaranteed to keep the home if something were to happen to you, and the idea of a protective life insurance policy for your mortgage makes sense.
- Unfortunately, some policies did not use to give you anything for all the premiums once your mortgage was paid for. As this was a thorn in the side of many a consumer advocate, the insurance companies revamped their policies and at this point in time you are eligible to receive your premiums back in a lump sum once you finish paying off your home. The downside is glaringly apparent: the numbers of individuals who will actually spend 30 years paying off their mortgages are few and far between. Most will move on, refinance, opt for a reverse mortgage, or move into a different setting. In other words, the premium payments are lost.
At this point in time it looks like the best candidates for this kind of mortgage are those consumers who have either failed to qualify for a different kind of coverage or who have not taken the time to purchase life insurance. Home owners who do carry life insurance already will most likely not benefit significantly from this option. Even though the companies assert that the paying into their policy is like a savings policy, the fact that only very few home owners actually pay down their mortgage over the 30 year count showcases that as a savings vehicle this is not a good way to go.
Consumer advocates suggest that you will be best served to invest in a regular life insurance policy and leave the protective life insurance for mortgages to others who do not have the time or inclination to purchase the real deal.
