Mortgage Life Insurance

Mortgage life insurance is really a specialized form of life insurance. What mortgage life insurance promises is to pay the balance of your mortgage in the event of your death.

While this is generally an over-priced form of life insurance, it can be a godsend if you find yourself unexpectedly needing it. I know this situation from experience. When I was 21 years old, my father died very suddenly. His death was completely unexpected; he had been in good health up to that point. So, without warning, my mother was a young widow of 42. I was in college at the time, and my two younger brothers were still in high school. My mother had to become the family breadwinner literally overnight.



Fortunately, although my father did not have enough other life insurance, my parents had taken out mortgage life insurance through the bank that they dealt with. When my father died, the mortgage was automatically paid off. That action was probably the difference between my mother being able to make it financially, and having us all in a dire financial situation.

Having said that, this insurance is generally a consumer rip-off. For the dollar amount of the benefit versus the dollar amount of the premium it is one of the most expensive insurances you can buy. Further, you will continue to pay the same premium while the amount of your mortgage is dropping. This means that you are paying the same money for a decreasing benefit!

However, it's better to have some life insurance than none. If you have some reason that you can't qualify for inexpensive life insurance, you might want to take life insurance on your mortgage through your lender. In my experience, most lenders do not ask for physicals or health checks before giving this insurance.

So, you may find that it actually works for you and your family, if you have a medical condition that would otherwise preclude you from an amount of insurance equal to your mortgage. But compare prices with other life insurance (particularly term life insurance) before going this route.

In general, you should remember to avoid mortgage life insurance as long as you can get yourself sufficient life insurance at a good cost elsewhere. If you have term life insurance sufficient to cover your mortgage and all other debt through an insurance company you will likely get all the coverage you need at a better price.


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