Why Mortgage Life Insurance is Not a Good Idea

If you've recently taken out a mortgage, brace yourself for the onslaught. Before you even finish unpacking, your mailbox will likely be filled with offers for all kinds of services.  

Obtaining a mortgage has traditionally been a trigger for life insurance agents and firms to begin marketing life insurance to the borrower. After all, the mortgage is of public record, and "mortgage leads" are peddled to life agents like candy.

"I've been in this business for almost 20 years, and I'm still waiting to see a 'mortgage' life insurance product that was a good value," says Byron Udell, founder and CEO of AccuQuote,a Web-based life insurance company.

While the assumption of a large debt is clearly one factor that affects the total amount of life insurance needed, it's not the only one. Nonetheless, life insurance companies continue to come up with products that are simple, and if one were to believe the marketing hype associated with them, you'd think they hit the bullseye when it comes to paying off a mortgage.  

The problem? These policies are generally overpriced to begin with, and become more costly as time goes on because premiums generally stay level, but the policy face amount (or death benefit) is reduced on the same schedule as the debt is reducing. So, in short, the cost per thousand of coverage starts out much too high (relative to other, benchmark products), and only gets worse over time.  

Further, when you die, in addition to paying off your mortgage and leaving your family debt-free, your spouse and children will also have income needs. Mortgage term does nothing to address these issues.

So, what should you do? If you need life insurance, speak with a life insurance broker, like AccuQuote.com that can help you determine how much, and what kind to buy. A quality broker has numerous insurance companies and hundreds of products to choose from. More importantly, they should know which are available, and best suited to your particular situation.  

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