If you are a new homeowner or you recently refinanced
chances are you have received many advertisements in your
mail box about Mortgage Protection Insurance. The letters
may vary in style and wording but they all say pretty much
the same thing. "You have not taken advantage of our low
cost mortgage protection program, please fill in the
information below and send it back as soon as possible."
The problem is these letters or offers often leave you with
a lot of unanswered questions. Who sent this letter and how
did they get my information? Are they affiliated with my
Bank? Do I really need Mortgage Protection? How much does
it cost, and is it really a good idea?
First of all where did this letter come from? Well that
depends. Sometimes a bank or lending institution may have
given your name out to a third party insurance company that
offers mortgage insurance and has some affiliation with the
bank. On the other hand, it might just be a local insurance
agent who is trying to generate business. The affiliated
insurance company obviously got your information from the
bank they are affiliated with but the insurance agent may
have just got your information from the county clerk. You
see, mortgages are a matter of public record and anyone
with some time on their hands and a little know how can go
down to the county court house and look up information
regarding your mortgage. To some this may be a little
disconcerting but it is perfectly legal.
So that is how those letters end up at your door but the
more important question is what is mortgage protection
insurance and do you really need it? Mortgage Protection
insurance is just what it sounds like. It is an insurance
policy designed to protect your family in the event that
you are not around to pay your mortgage for them. The plan
might be set up to pay off the loan if you die or if you
become disabled. But to answer the question do you need it
depends on a lot of other factors. Do you have dependents
that are counting on you to pay the mortgage every month?
If you became sick or injured and unable to work how long
could you pay the mortgage without your current income
coming in? Do you have other life insurance or disability
insurance in place? If so is it really going to be enough
now that you have taken on more obligations? When was the
last time you had a professional evaluate your insurance
needs? All of these questions should be taken into account
before you make a decision regarding Mortgage Protection
Insurance.
Well in addition to weighing all of the above questions you
may still be wondering if mortgage protection insurance is
a good deal or not. Again the answer is, it depends, and
there are many things about mortgage protection insurance
that you may not be aware of. Here are just a few examples.
If something looks too good to be true it usually is. For
example many of the plans that are sent out from bank
affiliates are very inexpensive so they may seem to be
quite attractive however you need to read the fine print or
find an advisor that can help you. The catch on these plans
usually is that they will only pay off if your death or
disability is the result of an accident. What happens if
you purchase one of these plans and you have a health
concern like, cancer, heart attack or stroke? They won't
pay dime one, that's what happens! So be careful that you
know what it is that you are buying. Especially if it is
being sold through the mail and looks too cheap to be true.
Accident plans only pay if you die in an accident, period.
Another problem with plans that are offered thorough the
bank is that many of them offer decreasing benefits. In
other words your insurance benefit will decrease as your
loan decreases. For example if you start out with a
$100,000 mortgage and you pay on it for 15 years and now
you only owe $72,000 your insurance contract's death
benefit will also drop to $72,000. At first this might not
seem like a problem and it's really not. But what if you
could instead have a level benefit for the same price? For
example what if you could have a $100,000 death benefit no
matter how much you owed on the house and it didn't cost
you anymore to do it that way? Wouldn't that be a better
deal? Well that deal dose exist so you may want to be
careful before you sign up for the first plan you see.
The other thing you really want to look out for with the
bank's plans are that almost all of them are
non-transferable. This means that if you change banks, or
you refinance, or even if you just sell your home you now
have to get a brand new mortgage insurance plan because the
bank's plan doesn't carry over. What if your health changes
and you don't qualify? What if your new bank doesn't offer
mortgage protection (not all banks do)? What if a few years
have gone by and now you are older and the costs have
increased due to your age? If any of these things happen
than you would have been better off buying a plan that was
transferable from one mortgage to the next. Theses
transferable plans are often not available through the bank
but must be purchased through an independent insurance
broker.
The last thing you need to be aware of is that many
mortgage protection plans are offered as a group benefit.
Just like the term life insurance that you get from your
employer. Group plans are offered to a group of people with
the same set of circumstances and because of this they are
easier to qualify for. This can work to your advantage or
your disadvantage depending on your circumstances. For
example if you are not so healthy and you already have a
health problem like diabetes you will most likely get a
very favorable rate if you purchase a plan as part of a
group because the health risks are spread out amount the
entire group and you are not left to bare the full cost of
your illness alone. However if you are in excellent health
and are not overweight and you don't take any prescription
medication than you may be better off not being lumped in
with a group of people that may be less healthy than you.
If you are willing to subject yourself to an easy medical
exam in the comfort of your own home or office than you may
just qualify for a much cheaper rate.
These are just some of the things you should take into
account when considering mortgage protection insurance. But
the most important thing to consider is will mortgage
protection insurance by itself really protect you and your
family? Even if you leave your home paid off for your loved
ones will they really be able to afford to live in it
without your income? Leaving your home free and clear for
the ones you love is certainly a noble idea and a
commendable one but have you really thought about what they
would do to survive financially in that house without you
to take care of them? If you really want to protect
yourself, your home, and your family than perhaps you
should consider talking to an advisor that can help custom
tailor a plan to meet your exact needs. Is mortgage
insurance a good idea for you? The only answer any
qualified advisor can give without looking at your
particular circumstances is, it depends. My advice is to
talk with a qualified Registered Financial Consultant today
to determine your family's needs and then once he/she maps
out all of the possibilities you can make an educated
buying decision.
----------------------------------------------------
Antonio Filippone is a respected speaker on a wide range of
subjects. He has been published in the official journal of
the IARFC as well as interviewed on the Radio about his out
side the box financial strategies.Readers who are
interested in gaining more information on how to live debt
free and truly wealthy can request a complimentary copy of
Mr. Filippone's booklet by visiting his website at
http://www.tonyfilippone.com
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