Should they get a Mortgage Life Insurance ?

Question

My client purchased a property 1 year ago. She now wants to sell the property because she felt a rapid growth in her neck that she could hardly breathe. She is now in the hospital waiting for the result of her biopsy. The property is in both her and her husband's name. Should they obtain Mortgage Life Insurance so (knock on the wood) if in case her health deteriorates and dies, her husband won't have to worry about the mortgage ? I'm sure they have home owner's insurance abd life insurance but I don't know if that would cover the mortgage loan or should they obtain a separate insurance.

Do you think Mortgage Life Insurance is absolutely necessity?

I've also received some offers to sign up but never did a 2nd look until now. any advise would be appreicated. thanks

Answer 1

When Mortgage Life Insurance is actually marketed and packaged as mortgage life insurance it is usually a rip off gimmicky kind of product.  Your client or you should just have a regular term life insurance policy if you want to pay off the mortgage.  There are even some companies that offer policies with decreasing face amounts that allow you to reduce your costs and coverage as you pay off your mortgage or build more savings.  

Given that the person is already in the hospital they probably will not qualify for life insurance.  Why you ask?  See this article.  http://gardenstatelifeinsurance.blogspot...

If everything comes out negative, then they can just use this as a wake up call and get the insurance going forward.

Answer 2

I'm not a big fan of mortgage life insurance (which is basically, decreasing term life insurance).  It costs more than straight term, pays less and less as the policy goes on, and you still have to qualify for it.

She's not going to be ABLE to get any life insurance, until this whatever is taken care of -  so it's kind of a moot point right now.  

But if she does want to insure her life - she should insure more than just that mortgage payment.   I've always thought mortgage life is a ripoff - the only person it really and truly benefits, is the LENDER.  If you want to benefit the spouse/kids, get regular life insurance.  The spouse can always pay off the house if he has to, but he could ALSO use the money for other expenses, if he feels the need.

Answer 3

For most people, Mortgage life is a waste of money.  Its way overpriced for what you get.  Instead get a term life policy, which for $1,000,000 worth of coverage, depending on age, term, and health, could cost as little as $20 a month.  That costs less than Mortgage Life, and pays more.

For the person in question though- if no health check is required, then yeah, it might be worth it for her.  But if she has to say she's in good health, or have a health check, she probably wont get very far anyway.

Answer 4

I wish your client well.

At this time, your client would not qualify for life insurance, until she receives a totally clean bill of health, especially if the growth turns out to be cancerous.

Mortgage life insurance is a good thing, but should also be combined with a disability income policy.

But the best way to get the most for one's personal insurance dollar is to have a professional insurance agent or financial planner complete a Financial Need Analysis to determine how much life and disability insurance one needs. Taken into consideration would not only be the morgage protection, but also final expenses, debt repayment, children's education, emergency fund, and monthly income to sustain the current standard of living of the survivor(s).

Answer 5

It looks like most answerers are against mortgage protection life insurance, but let me offer some counter-arguments. Critics of these policies say you would be better off getting a term policy for the same amount. This would allow the beneficiaries more flexibility with the money after your death. Flexibility, however, is the very thing people are trying to eliminate with mortgage protection life insurance. Grieving family members do not always make the best investment decisions. And, unfortunately, disreputable financial advisors often try to take advantage of survivors. Mortgage protection life insurance guarantees that the insurance money will be used to protect your largest asset—your home. It guarantees that your family will have a roof over its head. It also is recession-proof. Many people think the family can always sell the home to retire debts or pay medical bills. As the housing slump is showing, this is not always the case. The market value of a home can drop below the loan balance, creating “negative equity” in the home. Mortgage protection life insurance solves this problem. It will retire the home loan, no matter what the home value is. The family will own the home, free and clear. They can sell it at a reduced price and still realize a huge profit. Finally, policies can be written to include a terminal illness rider, paying off the home in the event that the policyholder is terminally ill. Rather than losing the house because you are no longer working due to terminal illness, you will be able to pay it off while you are still alive.