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Should I Buy Decreasing Term Insurance (Mortgage Protection Insurance)?

Should I Buy Mortgage Life Insurance?

Decreasing Term Insurance PictureWe have been receiving many calls lately asking about mortgage protection insurance, otherwise known as decreasing term insurance or mortgage life insurance.  The concept sounds logical; the death benefit equals the amount of the mortgage and decreases over time as your mortgage balance is paid down.  Shortly after closing escrow, a new home-buyer is deluged with offers for life insurance of this sort.  Some offers are very official looking like something from a mortgage company.  If you respond, a salesman will come to your home and walk you through a carefully scripted presentation which will make you feel like you must buy this product or very bad things will happen.  However, I would think twice before buying this kind of insurance.

The Insurance Premiums are Level, but the Benefit Decreases

That is right; you pay the same premium for the next 30 years, but the death benefit will decrease during this period.  Most other insurance policies have a death benefit that stays the same or increases over time.  If you are considering insurance to cover your mortgage, make sure to compare the cost of regular term insurance to mortgage life insurance.  You can easily run an instant quote for life insurance by entering a few details in the free life insurance quote box to the right.

Take a Holistic View of Your Life Insurance Needs

If you died tomorrow, your dependents may need to replace your income for a variety of reasons; not only to pay the mortgage.  It may not make sense to pay off the mortgage.  The insurance proceeds may be better suited for other needs and continuing to pay the mortgage might be a smart financial move.  You can learn more about why you should not pay off your mortgage by watching the video on our mortgage page.  Life insurance is part of an overall financial plan, and you need to take many details into account to maximize the benefit to your family.

When to Buy Mortgage Protection Insurance

We do not usually recommend buying mortgage life insurance, but there may be one exception to this rule.  The health standards to qualify for a mortgage protection policy are usually lower than a standard life insurance policy.  If you are in poor health and would likely face higher than usual premiums, or unable to qualify for regular life insurance, then you may want to consider a mortgage life insurance policy.  However, you will want to read the policy’s fine print for restrictions on covering pre-existing conditions or other qualifications that might challenge a payoff after your death.

Know Your Options

In summary, if you are considering mortgage protection insurance, decreasing term insurance or mortgage life insurance, check your other options before committing to this type of policy.  You might find more value for your insurance dollar in a different type of policy.  Do not hesitate to contact us for a complimentary and no-obligation review of any life insurance policy that you are considering.  We will provide honest and unbiased advice to help you purchase the best life insurance policy to protect your mortgage and your family.

 

 

About Chris Abrams

Chris and his team work with clients across the country to help them navigate the insurance and financial world. His mission is to help people and businesses have the protection they need at the lowest possible price. He works on behalf of his clients and not the insurance companies. When not researching the latest financial and insurance topics, Chris can be found spending time with his family, traveling, cooking or running on the beach.

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