- Oct 9, 1999
- 21,019
- 156
- 106
Today in the mail I got an offer from the mortgage company to sign up for life insurance. Of course, it pointed out how horrible it would be to lose a loved one and your home at the same time. So I am supposed to protect my family by buying this life insurance. The deal is I would pay $X a month, and if I die then the insurance pays off the mortgage.
This is a really bad financial move, and here's why.
1. It seems silly that I should pay for insurance when the mortgage company is the beneficiary. Let them buy it if they are going to collect on it.
2. The insurance is incredibly overpriced - in my case, about four times more costly than the life insurance I already have.
3. Since the insurance only pays off the mortgage, the amount of actual insurance declines as you make mortgage payments. But the cost doesn't decline!
If you need life insurance, you should have your family collect the money if you die. Buy your own policy at a much better price. Let your family decide if they want to pay off the mortgage. They might prefer to keep making the payments using the invested insurance money.
It just struck me funny that this plan which claims "to put your family first" in reality puts the mortgage company first. It's as if they sent a letter that said "Hey, if you die your family might not be able to pay this mortgage. How about paying for life insurance so if you die, we get all the money? That way, we're covered."
I realize this isn't much of a discussion topic, but hey, I had a few extra minutes.
This is a really bad financial move, and here's why.
1. It seems silly that I should pay for insurance when the mortgage company is the beneficiary. Let them buy it if they are going to collect on it.
2. The insurance is incredibly overpriced - in my case, about four times more costly than the life insurance I already have.
3. Since the insurance only pays off the mortgage, the amount of actual insurance declines as you make mortgage payments. But the cost doesn't decline!
If you need life insurance, you should have your family collect the money if you die. Buy your own policy at a much better price. Let your family decide if they want to pay off the mortgage. They might prefer to keep making the payments using the invested insurance money.
It just struck me funny that this plan which claims "to put your family first" in reality puts the mortgage company first. It's as if they sent a letter that said "Hey, if you die your family might not be able to pay this mortgage. How about paying for life insurance so if you die, we get all the money? That way, we're covered."
I realize this isn't much of a discussion topic, but hey, I had a few extra minutes.
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