Mortgage Life Insurance

There are many types of life insurance available to consumers, the two most popular being term life insurance and permanent life insurance.

But there are also other policies and products available that are not as well known as the two main types listed above.

One of these alternative products is mortgage life insurance, which has become increasingly more popular and well-known.

An article entitled “Beware of mortgage life insurance,” featured July 24, 2006 on Open Press, courtesy of Expansion Plus, Inc., gives some pertinent information on mortgage life insurance.

The article explains that the reason why mortgage life insurance has become more popular is because it is being marketed by a number of people, including mortgage brokers, bankers and life insurance agents in general.

So now, you may be asking yourself, ‘What in the world is mortgage life insurance?’ the article gives a good summary of this alternative life insurance product.

“In its purest form, it’s just a life insurance policy where the insurance benefit follows the decreasing amount of debt on one’s mortgage. So, as your mortgage balance goes down, the amount of insurance you have goes down. These have a level premium but decreasing insurance year by year.”

The reason why the author warns that you should beware of mortgage life insurance is because there are probably a lot of better options available out there.

Since your amount of coverage goes down with the amount of your mortgage this product may not be as sensible for some people as it is for others.

The author gives some alternative examples to mortgage life insurance that are usually much better options for most people.

“You can buy level premium life insurance for 20 or 30 years, with guaranteed premiums without decreases in the life insurance benefit, usually at lower prices than mortgage life insurance.”

“There are now term life insurance policies called return of premium life insurance that also last 20 or 30 years with guarantee premiums that will guarantee to return all the premiums you paid. Since this is considered a return of your premium and there was no profit, the interpretation is that this refund will be income tax free. Of course, you have to keep the policy to get this and if you don’t you will have paid more than you would have paid for a comparable term life policy. For someone who is confident that they will maintain a policy for the whole time, this option can work very well.”

The author also recommends looking into life insurance to protect your children or other loved ones in the future. The recommended amount of a life insurance policy to take out is between 10 and 20 times your annual income.

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