Mortgage death insurance, anyone?

[Holly_Hobby]

We've had our mortgage for 14 years, 6 more to go. We've had mortgage death insurance since inception. We have been paying $144.43 per quarter all that time. Today, we got a letter from Gencorp (GE), telling us that our quarterly payments will go up to $797.18 OR we can reduce our insurance to $20,000 to keep the quarterly payments at $144.43. WTF??? Anyone?

[Roland99]

1. Does that build up value like a life insurance policy?

I think I'd probably rather have a life insurance policy that something like that.

[Sadie5]

5. Sounds like a rip off

We only pay $122.30 per month. Get a regular life insurance policy if you can. $144 per qtr is pretty steep.

[Holly_Hobby]

10. We have regular, whole life insurance too n/t

[Holly_Hobby]

8. Our mortgage is paid in full in the event one of us dies

The value has always been $100,000. Let's say we owed $15,000 when one of us dies, they would pay off the mortgage and send the other one a check for $85,000. I'm not sure of the proper term for this kind of policy.

[angstlessk]

2. Get decreasing term insurance to cover the value of your mortgage

the cheapest insurnce you could purchase.

[Holly_Hobby]

11. Ok....a five year term policy would work for us - thanks n/t

[wuushew]

3. What is the balance left on the mortgage?

If you don't mind me asking.

[Holly_Hobby]

13. Around $18,000

I think we should take that $800/quarter payment and just make extra house payments!

[Marie26]

4. It actually protects the bank

"Does mortgage insurance make sense?" - http://money.cnn.com/2003/12/19/pf/expert/ask_expert/index.htm?postversion=2003121909

Have you considered asking a financial advisor about this?

[Holly_Hobby]

15. We did, when we bought our house

She said "the man is usually the one who dies", and he's the major breadwinner. She said it would enable me to keep the house if he died.

[Marie26]

21. Honestly,

I would consult a second, independent, opinion now. A lot of these insurance plans are scams, and there are ways to opt out of them. But please don't take people's advice on a discussion board (including mine!) w/o speaking to an expert.

[Swede]

6. Can't you just get a term policy

and bequeath part of the death benifit to your estate? That way the bank will get it's money.

[Holly_Hobby]

16. Excellent idea, thanks! n/t

[sharp_stick]

7. I'd look for other forms of insurance

It looks like they want you to pay a lot more for a policy that will pay out a lot less than when it started. Unless there are some detrimental health issues it might make more sense to look around for a different kind of policy. Maybe term life, but I'm not familiar with the offerings.

Good luck.

[EvolveOrConvolve]

9. Mortgage Death Insurance is usually not worthwhile

A term life insurance policy would have been better.

The $144.43 you've invested per quarter over 14 years would have added up to almost $17,000 dollars if you had invested it rather than paying for the insurance policy. I'm not sure what the balance is on your mortgage, but your house might be paid off if you'd invested wisely then paid off the mortgage.

[Holly_Hobby]

18. We had no advice when we bought a house, so

we hired a financial planner to help. We were obviously given bad advice. Thanks.

[EvolveOrConvolve]

25. It wasn't necessarily bad advice

It was just far more conservative than I would have gone for. For example, if you had invested the mortgage insurance rather than paying it the the insurance company, you would be able to pay off your house now, and could be even further ahead in 6 years. If your mortgage payment is $500 per month, and if you had invested that money at an average 8% return, you would have almost $50,000 more in your bank account in six years than you do now.

[NewJeffCT]

12. Are you required to have Mortgage Insurance?

If not, then dump it altogether.

If you think you or spouse could not make your house payments if one of you passed away, then get regular term insurance, as it is probably much more affordable.

[Holly_Hobby]

19. No, it's not required

We wanted to be able to keep the house if one of us died. I can see the mistake we made. Thanks for your reply.

[On the Road]

24. This Sounds Different from PMI (which protects the lender)

Mortgage death insurance might be a good option in this situation. It would depend on the premiums and the need for coverage.

If one partner dies, the other might be able to move, or want to move. In that case, the only money needed would be to cover expenses until the actual sale of the house. If there's positive equity, that could be done via a home equity line of credit (which could even be applied for now).

If the remaining partner wants to remain in the house without sufficient income, mortgage death insurance would cover that. Although as the other poster pointed out, the premiums could have been used to pay off $17,000 of equity.

On Edit: Personally, I don't like to buy a lot of insurance, and would rather put that money into savings. I just want to clarify the distinction between PMI, which protects the lender, and mortgage death insurance, which protects the policyholder.

[napi21]

14. Mortgage death insurance has always been a scam.

I recall back in 1964 when we bought our first house, we were told it was much betterand much cheaper to buy term life insurance in the amount equal to the mortgage and for the same approximate term. It will do the same thing, and cost less than 1/4 of what they wanted for mortgage ins.

[bluerum]

17. You don't need it. Sometimes banks require it when you first take

out a mortgage depending on your down payment etc.

At this point, if you have life insurance to protect your surviving family, or they can carry the mortgage on their own, dump it ASAP.

[Holly_Hobby]

20. Yes, we have whole life policies too

If I died, my husband can afford the rest of the payments. If he dies, I certainly cannot afford it on my own, but I've changed my mind about wanting to stay here, so it's a moot point. I would sell, even though his whole life policy would pay the remaining payments.

[Swede]

22. Re-read your policy.

Wholelife will give you the face value but not the cash value,so the money you saved up will be kept by the insurance company. Watch Suze Orman Show,she hates wholelife and universal and will tell you why. Here's a link.

http://www.suzeorman.com/

Here is her advice to Oprah.

http://www.oprah.com/omagazine/200308/omag_200308_suze.jhtml

[flamin lib]

23. This is known as Credit Life Insurance. IMO it is a poor way to

cover the contingency of the loss of a breadwinner. As so many have suggested it is almost always better to get an inexpensive term life insurance policy.

You mentioned that you have whole life insurance. If you've had it long enough you may be able to use the cash value increase to pay the premiums. In a sense you will have the policy for free. Use the money you were paying into premiums to pick up some term life or invest it in your 401K.

Talk to your agent and see if it's possible to use the cash value increase to pay for the insurance.