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Sarah Said:

Mortgage Life insurance or regular Life insurance?

We Answered:

Mimi, actually, yes, Mortgage life DOES name the lender as BENEFICIARY. The LENDER is the one who gets paid. That's the POINT of it. I'm not talking about homeowners insurance, I'm talking about decreasing term life insurance, where the MORTGAGEE gets paid off, if you die. ONLY the mortage balance gets paid. ONLY the mortgagee gets paid.


Mortgage life insurance, is another name for "decreasing term life insurance". I'm not a fan, and here's why:

The premium you pay, stays the same, for the whole term - just like term life. BUT, the coverage amount goes down. Every time you make a payment on your mortgage, you owe a little bit less.

Plus, mortgage life COSTS more than term insurance. So, on average, you pay a LOT more, for less and less coverage. If you die the month before the house is paid off, you're entitled to . . . ONE mortgage payment.

Worst of all, it's not even YOU who gets it - it's your LENDER. It pays to protect the LENDER!! How nuts is that? If your lender wants protection against you defaulting on the mortgage because you die, let THEM buy it! Don't buy insurance that pays someone ELSE!

If you WANT life insurance, buy real life insurance that will pay your spouse if you die. If you buy $180,000 coverage - probably at about the same cost as that decreasing term policy - and you die in 10 years, REAL life insurance will pay your husband $180,000. He can pay off the mortgage with some, and use the rest to pay taxes, utilities, food, daycare, whatever. If you buy the mortgage life, the LENDER gets paid, and your husband gets NOTHING. If you prepay your mortgage, then it's even a worse deal, as the coverage goes away even FASTER.

Really. I'm not a fan. Run the numbers, I think you won't be a fan, either.

You're saying, $25 a month for both of you, for $180,000 in coverage. I'm saying, if you're under 30 and healthy, you can buy $200,000 of 20 year term life insurance, for about $175 a year, each. When you do that math . . . that 20 year term is MORE coverage, for LESS money.

And I think this "friend" isn't sure of what he's selling - like he just got his license, and smells a sale. Because what you're describing, is NOT how "mortgage life insurance" works. So SOMEONE is confused about it.

Willie Said:

I need affordable mortgage life insurance. I' m 62 and have a heart problem that is under control with meds?

We Answered:

If you are taking out Mortgage Life Insurance from the lender you might as well cancel it. IT likely won't pay even if you're paying the premiums. They do their underwriting at the time of claim, which means they don't decide if it will payout until after you die. At that point they will find out about your heart conditions and claim it was a pre-existing condition and deny the claim.

Contact your local insurance broker and get Term Life Insurance. A broker will find you the best option. At your age it won't be cheap, but at least they can find something that will pay out if you pass away before 92. If you can't get approved for standard Term Life, there is always the option of Gauranteed Issue Life Insurance where there is no medical underwriting and it's gauranteed, no matter what your condition is. This is very expensive, but as a last resort it's better than nothing.

Tom Said:

Should they get a Mortgage Life Insurance ?

We Answered:

It looks like most answerers are against mortgage protection life insurance, but let me offer some counter-arguments. Critics of these policies say you would be better off getting a term policy for the same amount. This would allow the beneficiaries more flexibility with the money after your death. Flexibility, however, is the very thing people are trying to eliminate with mortgage protection life insurance. Grieving family members do not always make the best investment decisions. And, unfortunately, disreputable financial advisors often try to take advantage of survivors. Mortgage protection life insurance guarantees that the insurance money will be used to protect your largest asset—your home. It guarantees that your family will have a roof over its head. It also is recession-proof. Many people think the family can always sell the home to retire debts or pay medical bills. As the housing slump is showing, this is not always the case. The market value of a home can drop below the loan balance, creating “negative equity” in the home. Mortgage protection life insurance solves this problem. It will retire the home loan, no matter what the home value is. The family will own the home, free and clear. They can sell it at a reduced price and still realize a huge profit. Finally, policies can be written to include a terminal illness rider, paying off the home in the event that the policyholder is terminally ill. Rather than losing the house because you are no longer working due to terminal illness, you will be able to pay it off while you are still alive.

Jay Said:

Mortgage life insurance or regular life insurance?

We Answered:

Get "regular" life insurance. It's a much better deal. And never have business dealings with "friends."

Lonnie Said:

Should I get Mortgage Life Insurance? (If I die, my mortgage is paid for.)?

We Answered:

Think of it this way. What you are essentially buying is Term Life Insurance for the amount of your remaining mortgage, where the mortgage company will be the beneficiary.

The first thing I noticed is your insurance payment remains constant, while the payout declines over time.

I would recommend you shop for Term Life insurance.

I did a quick instant quote on insure.com, using your age and that you are in perfect health and didn't smoke, and that you needed a $200,000 term life policy. The best rate I came up with was $14 a month. That gives you something to gauge by.

If you are in similar circumstances, your quoted cost of $2.43 is a good deal, until the mortgage balance declines to maybe $150k or less. Just make sure you can cancel it at any time.