Mortgage Protection Insurance

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Mortgage Protection Insurance

Spencer Krautkramer
Member since 2021 · 32 posts · 17 votes
  1. I’ve gotten a couple letters in the mail after just recently purchasing my first property - they are about Mortgage Protection Life Insurance or Mortgage Payment Protection Programs. Is this spam or legit, and what is everyone's thoughts on this? Is it something that’s worth doing and paying for or not?
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Mike S.
Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
3y

A mortgage life insurance is a kind of term life insurance that will pay the remaining balance of your mortgage if you die before the end of the mortgage.

The amount of death benefit decreases every month as your mortgage balance decrease. The amount of premium you pay monthly could be averaged over the total duration of your mortgage or can decrease based on the amount left at risk.

Like most term life insurance, they are usually cheap (if you are reasonably young and have no preexisting medical issue). They rarely pay out (less than 2%) as you are expected to live past its term.

Term life insurance has its place to cover your family if you die early. It is often used to replace your salary for a spouse or to pay for your children expenses until they are old enough to work.

Another kind of insurance is permanent life insurance (the most common today are Whole Life and Index Universal Life). As these insurance are covering your for the totality of your life, they will have to pay eventually a death benefit. So for the life insurance company, compared to a term product where they only pay out 2% of the time, they now have to pay out 100% of the time. It make these products much more expensive to purchase, but on the other end you are sure that your family will benefit from it.

So depending on your financial profile and your needs, it may be advisable in some case not to use any term products but only permanent life insurance instead, or a combination of both.

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  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    3y

    Total spam/scam. If you need life insurance, get actual life insurance.

    0Reply
  • Mike S.
    Investor · Broward County, FL · Member since 2018 · 1k+ posts · 938 votes
    3y

    A mortgage life insurance is a kind of term life insurance that will pay the remaining balance of your mortgage if you die before the end of the mortgage.

    The amount of death benefit decreases every month as your mortgage balance decrease. The amount of premium you pay monthly could be averaged over the total duration of your mortgage or can decrease based on the amount left at risk.

    Like most term life insurance, they are usually cheap (if you are reasonably young and have no preexisting medical issue). They rarely pay out (less than 2%) as you are expected to live past its term.

    Term life insurance has its place to cover your family if you die early. It is often used to replace your salary for a spouse or to pay for your children expenses until they are old enough to work.

    Another kind of insurance is permanent life insurance (the most common today are Whole Life and Index Universal Life). As these insurance are covering your for the totality of your life, they will have to pay eventually a death benefit. So for the life insurance company, compared to a term product where they only pay out 2% of the time, they now have to pay out 100% of the time. It make these products much more expensive to purchase, but on the other end you are sure that your family will benefit from it.

    So depending on your financial profile and your needs, it may be advisable in some case not to use any term products but only permanent life insurance instead, or a combination of both.

    1Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    3y

    @Spencer Krautkramer yeah, many other better products exist out there.  Life insurance would be the better alternative. 

    0Reply
  • Matt Ruttenberg
    Specialist · Grand Rapids, MI · Member since 2020 · 116 posts · 80 votes
    3y
    Quote from @Spencer Krautkramer:
    1. I’ve gotten a couple letters in the mail after just recently purchasing my first property - they are about Mortgage Protection Life Insurance or Mortgage Payment Protection Programs. Is this spam or legit, and what is everyone's thoughts on this? Is it something that’s worth doing and paying for or not?

     The mortgage company usually sells your information to these companies, plus it's public record on the deed.  

    Unless you're financially independent outside of the mortgage, then you might need a regular term policy instead of one that drops based on the mortgage balance.

    0Reply
  • Christopher Jason LloydBusiness Member
    Real Estate Broker · Newport News, VA · Member since 2020 · 95 posts · 83 votes
    3y

    You will get a lot of these the first 6 months or so after purchasing.  IMO, its junk but some people think its worth it.  I think life insurance is a better alternative.

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  • Ray WilliamsBusiness Member
    Lender · Denver, CO · Member since 2017 · 162 posts · 73 votes
    3y

    All comes down to your perspective and beliefs in insurance as whole. Think of it as disability insurance for your mortgage. Whether it is good, bad, or indifferent lies within your beliefs. I have never believed it applies, but research and decide for yourself. 

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  • Thomas RutkowskiPro Member
    Financial Advisor · Boynton Beach, FL · Member since 2015 · 834 posts · 798 votes
    3y

    @Spencer Krautkramer

    The companies that are bombarding you with email are probably NOT the best companies to use.

    This is a good time to think more holistically about your life insurance needs. If you were to pass away there are a lot of concerns besides your mortgage. Will your wife be able to support the household without your income? Do you want to make sure there is enough money to put the kids through college?

    Tom Rutkowski

    1Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    3y

    I worked for a finance company out of college over 30 years ago and we were forced to peddle that stuff. Credit Life, Accident/Health/Involuntary Unemployment "coverage" only either pays off the loan (credit life) or makes loan payments (A&H and IUI). It only really benefits the lenders or the insurance company. Credit Life goes away when you pay off the loan. You will usually get a much lower premium with a Term Life Policy for your loan amount and it is still there after you pay off the loan, unlike Credit Life. It's not technically a scam, but it's not really your best option. Good luck to you. 

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