Insurance Mansfield

New homeowners face a barrage of sales pitches. In addition to lawn care and furniture, those pitches invariably include mortgage life insurance, which promises to pay off your home if you die. Since your mortgage is probably your biggest financial commitment, this sounds great in theory. But here's why you're probably better off buying a personal life insurance policy instead.

1. Mortgage insurance may leave your family short. "The financial impact of your death extends far beyond mortgage payments," says USAA CERTIFIED FINANCIAL PLANNER^TM practitioner J.J. Montanaro. "If you only cover your mortgage, your family may still struggle to make ends meet." Montanaro recommends calculating your total life insurance needs, considering additional needs like college tuition and supplementing your survivor's income.
2. It may not be a bargain. Often, mortgage life insurance is issued regardless of how healthy you are. "That's helpful if you've had serious medical problems," says Montanaro, "but policies that take everyone usually cost more." The bottom line? If you're healthy, you may be able to get more coverage for less money by buying a level term life insurance policy.
3. Your security blanket may have holes. Check the fine print — many mortgage insurance plans only pay off if you die from an accident. "Your family will face the same hardship no matter how you die," says Montanaro, "so it's important that your life insurance coverage is comprehensive."
4. It isn't always portable. If you buy the coverage from your lender, it may disappear if you refinance. "Just as you want to avoid depending on your employer's life insurance coverage, in case you change jobs, you should also make sure your insurance isn't going to vanish just because you found a better mortgage," says Montanaro.
5. The proceeds may bypass your loved ones. Some mortgage insurance plans automatically pay off your loan no matter what situation your family faces at your death. "An individual life insurance policy lets you name your spouse or children as beneficiaries, giving them flexibility to pay off the mortgage when they feel the time is right," says Montanaro.
6. The benefits may vanish before your eyes. Some mortgage insurance benefits gradually decline in an attempt to match the declining balance of your debt. "Those plans are like a runaway train," says Montanaro. "You may move into a bigger house with a bigger mortgage, but the death benefit keeps shrinking anyway. Buying an individual life insurance policy keeps you in the driver's seat, letting you lower the benefits as you see fit."