Why You Should Decline Mortgage Life Insurance

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Many times when you purchase a home and put down less than 20 percent for a down payment, you’ll be required to purchase a mortgage life insurance product. If it is a requirement, there’s little you can do to get around it. It isn’t the end of the world since it does pay off the home mortgage note if you die before payoff. If you have a choice in whether to purchase the product or not, you should decline. In most cases it ends up being an unnecessary expense that decreases in value over the years.

Don’t get mortgage life insurance confused with private mortgage insurance because they are different.  Mortgage life insurance will cover the remainder of your mortgage incase of death before you are paid in full.

Most Policies are Expensive

Mortgage life insurance is expensive. The reason is because you typically get it at the start of your loan. The insurance company is taking a gamble as to whether you will die within the first few years, which leaves them having to pay a large amount of money to clear the note. They also typically cover anyone, regardless of health conditions. In other words, everyone bears the weight of covering those with bad health. Regular life insurance policies can be much more selective on who they cover and the rates they charge each individual.

Value of the Mortgage Life Insurance

Another good reason to decline mortgage life insurance is that the value of the product declines naturally over the life of the note. As you make each payment, the amount owed decreases. This means that if something should happen to you in ten years, they will be paying off the mortgage, minus the ten years of payments that you’ve already made. Thus, the value of the life insurance decreases every month that you continue paying on the mortgage. The payments will remain the same, however.

You Still Need Added Insurance

Purchasing a mortgage life insurance product will alleviate worries for your family when it comes to paying off the house, but there are a lot of expenses that it won’t touch. You still need to have additional life insurance products to protect your family and estate if you pass away unexpectedly. You will need to make sure there is enough available cash to pay creditors and other burial expenses. It’s better to decline the life insurance for the mortgage and spend the money on adequate term policies. You can get more for your money and your family can use the cash benefits in whatever manner is best at the time. Saving money and getting more is always a better option.

Final Thought

Providing your family financial security is important, but you don’t have to spend a fortune doing it. Mortgage life insurance, though well intended, isn’t for everyone. Unless you have a bad health condition, you can find much cheaper life insurance policies separate from the mortgage that allow your family more control over what needs paid and when. The home mortgage can always be refinanced, but creditors could end up knocking at the door if they aren’t paid quickly. Help your family avoid the hassles and decline mortgage life insurance.

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