Breakdown of Mortgage Protection Life Insurance
If you have a mortgage, the mortgage may have a life insurance policy attached to ensure the lender is repaid in case of death of the borrower. If your mortgage is insured, the cost will appear on your monthly mortgage statement.
Here’s why it’s worth checking: If your mortgage balance was $200,000 in the beginning, but now is only $150,000, the cost of the insurance has probably not decreased accordingly. You may still be paying $200,000 rates to insure a mortgage balance of $150,000. And if no physical was required at the time you took out your mortgage, the rates may be higher than they need to be if you are in good health.
When you closed on your home, the bank representative may have asked if you want to pay off your mortgage if you die. Now comes the best line in the world for the bank’s insurance salesperson, “There’s no health questions and we can add it to your monthly mortgage payment.” No exam, no labs, no doctor reports – could not be easier. You sign up, but there’s a catch.
The Catch with Mortgage Protection Life Insurance
The catch is, with these types of guarantee-issue policies, you are lumped into the general population health-wise. In order to offer this type of contract, the insurer must “pad” the rates to allow for sick people to qualify. If you’re in good health, you’re probably paying too much, maybe twice to three times. If you’re in poor health or a smoker, buy all you can get, because the costs are in your favor. the healthy non-smokers are subsidizing your costs.
An Alternative Solution to Mortgage Protection Life Insurance
The alternate solution is to buy an individual policy that you name the beneficiary and probably pay a lot less. The downside is, you have to take a simple exam with a nurse. So you get a free exam (and request a copy of your lab results) with no obligation, if you’re not happy with the company’s offer.
There are other downsides with mortgage insurance as well. First is, if you die, the mortgage company gets paid first. Any money left over go to you secondary beneficiary. That person doesn’t get the option to take the cash and continue paying the mortgage.
Is the coverage portable if you refinance?
Is there an age cutoff with the coverage? With many carriers, it’s age 70?
Check your mortgage statement and then get a free instant quote (above) and see how much you can save.
Many times, an individual term life policy will be less expensive and the coverage will be level, not decreasing.
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