Mortgage Life Insurance?

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brad
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Mortgage Life Insurance?

Postby brad » Wed May 16, 2007 3:40 pm

So (much sooner than planned), we're in the process of buying our first home.

Our mortgage lender offers Mortgage Life Insurance (i.e., insurance to cover the mortgage if one of us dies and the other can't afford to pay for the house). Is this a good thing to have? We both already have basic life insurance coverage through our employers, but I assume it would be better to have this coverage as well. The only thing that worries me is that the info they provide doesn't give me any idea of what kind of premiums I might be in for (although it does allow me to cancel the coverage within 10 days with no penalty if I decide I don't want it). The insurance is provided by an established insurer (Canada Life).

Any advice?

consultantjournal
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Postby consultantjournal » Wed May 16, 2007 4:36 pm

Don't do it. Increase your regular life insurance to cover your mortgage. We thought we were doing the right thing by having both mortgage insurance and life insurance. Then, when we moved, our bank would not approve the conditions of our new mortgage and we had to switch lenders. As a result, we lost our mortgage life insurance. And now we're older and the premiums are much higher than they were 3 years ago. So we ended up taking out more regular life insurance. The rates on that have gone up, too, but at least it's totally portable.
Andrea Coutu
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tinyhands
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Postby tinyhands » Thu May 17, 2007 8:36 am

I'll go one step further and say that I personally think you only need the life insurance if you have dependants or heirs who would be in financially dire straits if either or both of you died. If it's just the two of you and something awful happens to one, I don't think it's unreasonable to sell the house and return to a modest standard of living on the survivor's income. However, if you have children or elderly parents who depend on your two incomes, you may need the insurance to make up the difference.
Read my 'fiscal fitness' financial disclosures <a href="http://www.getrichslowly.org/forum/viewtopic.php?t=176">here</a>.

brad
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Postby brad » Thu May 17, 2007 9:49 am

Well, in our case I do think it makes some sense, since we're really buying this house on the strength of my income. We will have joint ownership of the house, but I'm really the breadwinner and earn six times what my girlfriend does, so if I die there's no way she'd be able to afford to stay there and in fact she'd probably be stuck living in near-poverty housing (which is where she was living when I met her). So I'm going to go ahead and get it, although Andrea's idea makes a lot of sense to me. I just don't have time to deal with it right now (which in fact is part of the mortgage life insurance ploy...there is so much to stress over and deal with when buying a house that you're much more likely to snap at an offer than when you have time to research it and consider the alternatives). Sigh.

cbast82
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Postby cbast82 » Thu May 17, 2007 11:15 am

I would agree with Andrea. Don't do it. Like you said, it's a ploy. If you're that worried about it- increase your regular life insurance. When we bought our first house about 10 months ago we were flooded with Mortgage Life Insurance offers. In my opinion, any type of product that will prompt that level of junk mail is probably a get rich quick scheme... for the other guy.

guinness416
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Postby guinness416 » Thu May 17, 2007 1:57 pm

The Toronto Star had a good article about this recently:

http://www.thestar.com/Business/article/205853

brad
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Postby brad » Thu May 17, 2007 2:06 pm

Thanks very much for that link.

You all have convinced me to change my mind; I'll cancel that insurance.

-Brad


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