Death and disability mortgage insurance?

Question

My husband and I just bought our first home. Now we keep getting mail from all different companies saying that we qualify for this 'death and disability' insurance. It sounds like a good thing to have, in case one of us dies or is disabled, but o we need this insurance, or is it a scam?

Answer 1

I would definately recommend purchasing it.  I bought a home with my father and he passed away and we thought we had it....our mortgage was bought out by another company it did not transfer with that company so when he passed away I was still responsible myself for paying the mortgage.  I am not sure the validity of the companies contacting you as ours was purchased through the company that held the mortgage.  I would check with your finance company and inquire about purchasing the insurance from them directly.  If your mortgage is transferred/sold to another finance company and you have purchased the insurance I would recommend following up with the new mortgage company to make sure you still have so you don't get into a bind as I did....good luck!!

Answer 2

You should purchase a policy for term life insurance from a company not related to your mortgage company.  Check out ambest.com.  It's a site that rates insurance companies.

Answer 3

If it is "mortgage" or "creditor"  insurance offered by the lending company (IE: the bank or whatever), do not get it.  That stuff typically isn't regulated by insurance councils and they do their underwriting at the time of claim, which means you could pay into it for ever and when either of you dies you might not even get paid.  The bank is more or less insuring that they get paid, either by you or the insurance company.  Also, most lenders are not licensed to sell insurance and are very rarely even trained on the difference between different insurances.

Term insurance is a far superior product and I have NEVER seen a single comparison that shows creditor insurance being better than term.  You have full control over what happens with it.  They do the underwriting up front and you decide who gets the money so if that person doesn't want to put the money towards the debt, they can use it for something else, such as putting your kids through school or something.  

Check out the sources for videos and comparisons of cases where Mortgage insurance didn't pay out and how Term Life is better.

If that isn't enough for you google search something like "Term vs. Mortgage Insurance" or "term vs. creditor insurance"  I will bet you anything you want that you won't find a legitimate article that says term is inferior to mortgage insurance.

Contact a licensed insurance broker (someone that has access to multiple companies) and they will shop around for the best Term insurance coverage for you.

Answer 4

Death mortage insurance, is just life insurance, that pays the mortgagee.  If you want life insurance, make it pay the other spouse, then they get to choose what they do with it, if you die.  It's CHEAPER that way, too.

Disability insurance to pay the mortgage, only pays the mortgage.  If you want disability insurance, get it to pay YOU, not the mortgage.  You WILL have other bills, besides the mortgage.  Like, food, electricity, insurance, etc.  And, surprise, it's CHEAPER if it pays you.

These aren't scams, but they aren't the BEST product, because the only person who benefits from THEIR plan, is the MORTGAGE COMPANY!!!

Answer 5

It would be wise to carry these types of insurance on the both of you.  For many obvious reasons.  When purchasing Life and Disability Insurance do some reseach and make sure that they are a highly rated company by a mojor rating agency.  This includes S&P, Moody's, Fitch and AM Best.  

Look for top ratings by each of those agencies.  By having a high rating this means that the insurance company is financially stable to be able to pay you claim.

Here is a pretty good article by Suze Orman that covers alot of the basics of Life/Disabilty insurance.

http://finance.yahoo.com/expert/article/...

Life Insurance Primer by CNN

http://money.cnn.com/magazines/moneymag/...

Good Luck