May 30
Is mortgage life insurance or group term life insurance a good deal?
That depends. If group term life insurance is free, paid for you by your employer, then yes…take the coverage. However, most of the time, if you are in good health, the answer is no. Why? Because mortgage life insurance and group term life insurance is more expensive.
The main difference between individual life insurance rates and group rates is that the premiums in group life insurance rates go up every five years (or so), because the risk of death associated with age increases. The downsides of group life insurance coverage are:
- You may lose life insurance coverage if you change jobs
- Limited life insurance coverage options and features to select from
- Group policies are more standard than individual life insurance plans
Mortgage life insurance is an insurance policy that will repay your mortgage in the event of your death. It rarely makes sense to buy insurance for a few reasons. First, you should not just insure yourself to provide funds to pay off a single liability, in this case your mortgage. Instead, you should take your overall financial picture into account when buying life insurance. Second, most of the time the mortgage life insurance policy’s death benefit decreases as what you owe on your mortgage decreases..thus making this type of insurance more expensive every year.
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June 7th, 2007 at 11:58 pm
Mortgage life insurance seems like an odd offering to me. I mean, heck, if you drive a really nice vehicle, would they also be selling Bentley life insurance policies? If you are covered adequately, your beneficiaries should be able to handle the mortgage, anyway, I should think.