One of the most common forms of life insurance is the mortgage life insurance policies. They are used to pay off any home mortgage balance in the event something was to fatally happen to you. But are these policies a good deal? Here’s a look.
The best part of having this type of insurance is that your family can have a paid off home balance if anything were to ever happen to you. The other aspect is that in most cases the cost of the coverage goes down each year as the balance decreases.
Similar to your standard credit life insurance contracts you have for your credit cards; there are several negative aspects to mortgage life as well. In fact, many consumer advocacy groups are advising against purchasing these policies.
The single biggest complaint is that once your home is paid off, you have nothing to show for all the premium payments you made over the years. While that makes sense, one could argue that you did have coverage all those years in the event something did happen.
Studies that have been done over the years have shown that overall, life insurers will only ever pay out 40 cents on the dollar. Looking at that it is easy to understand how big money can be made in selling these contracts.
The ultimate question is whether or not you should purchase a policy? The answer takes a little bit of thought and consideration. Do you currently have life insurance? If so, is the total amount of coverage higher than your mortgage? Could you medically qualify for a standard life policy? If the answers are yes, then perhaps you would be better served by passing on this type of insurance.