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I am interested to know about mortgage insurance (not PMI) in the event my partner or I dies? Does anybody recommend a company or have any details about this type of insurance? Would we be better of just getting a term life insurance policy for say 20 years...we are in our late 30's. I was quoted by a company about 40 a month for accidental insurance. If we wanted illness/accidental death then it would be 300 per month.
Accidental death insurance only covers in case of an accident. Keep in mind that people can die early without having an accident. Only term life would cover this. It would also cover accidental death. Term is good to have for the life of the mortgage at least.
The illness/accidental death policy is closer to disability coverage and pays if you're sick or die in an accident. Most of these have a limit on how long they pay. They're ok to supplement what you might have at work. $300 a month seems like an awful lot for what you get. Might be better to put that amount into an good sized emergency account.
ok, so instead of getting mortgage insurance accidental death(not sure if that is what it is called) should my partner and I just get term life insurance for say 20 years?
Term life insurance is a WAY better deal then accidental death mortgage protection--which is a life insurance policy too but very specific. For $300/month you can get a HUGE term policy or you can get a permanent policy like a variable life product where you have life insurance until you are 100 (cover your funeral costs/final expenses--say for large medical bills, etc.) and earn a cash value because some of your premium is invested in stocks/bonds/mutual funds, etc.
With term insurance you pay on it for 20 year (or whatever) and then it is gone--you get nothing from it if you don't die in that time frame. With a permanent policy you will always have your death benefit and you should have a sizable cash value as well depending on market conditions (like ANY investment). Call your insurance agent and see what would work best for you but I would NOT go with the policy you mentioned. It is a rip off/scam.
Given that the mortgage payoff will be a decreasing amount over the years, I'd question the "need" for even a 20 year term life policy at the current full payoff amount.
As usual, golfgal ... who I recall from other posts is an insurance agent ... still persists in touting insurance policies as a means of building wealth. We've had a lot of discussion about that on the forum and the general consensus has been that insurance policies are a lesser choice for that objective. The bottom line remains that the long term policy "cash value" comes at a far more expensive cost to you than you can obtain from other investment vehicles.
But, building wealth is really not your objective here, is it?
You should also consider how desirable it will be to remain in this house should your partner pass away. For many reasons, personal and financial, that may not neccessarily be a good choice at the time. A modest term life policy could bridge the financial gap for awhile as you sort out the options at the time.
Depending upon the laws of the state you're living in, there may be advantages to JTWROS or undivided tenants in common ownership. You should check with your attorney & accountant for those details, if you haven't already. There will be other factors to consider, such as the disposition of the asset should the relationship not last.
I would go with a 20 year term policy for about 80% of my current mortgage amount. The reason being that if you apply this to the outstanding balance, the amortization schedule will make the remaining payments (if any) practically all principal. To be efficient, I would actually do a 10 year term policy for 80%, and then, at the expiration, a new 10 year term policy for 70% of the remaining balance. The cost will be less overall, and you will generally achieve your objective of protecting your asset, even if the death is via natural causes instead of accidental.
Given that the mortgage payoff will be a decreasing amount over the years, I'd question the "need" for even a 20 year term life policy at the current full payoff amount.
As usual, golfgal ... who I recall from other posts is an insurance agent ... still persists in touting insurance policies as a means of building wealth. We've had a lot of discussion about that on the forum and the general consensus has been that insurance policies are a lesser choice for that objective. The bottom line remains that the long term policy "cash value" comes at a far more expensive cost to you than you can obtain from other investment vehicles.
But, building wealth is really not your objective here, is it?
You should also consider how desirable it will be to remain in this house should your partner pass away. For many reasons, personal and financial, that may not neccessarily be a good choice at the time. A modest term life policy could bridge the financial gap for awhile as you sort out the options at the time.
Depending upon the laws of the state you're living in, there may be advantages to JTWROS or undivided tenants in common ownership. You should check with your attorney & accountant for those details, if you haven't already. There will be other factors to consider, such as the disposition of the asset should the relationship not last.
My question to you is have you even investigated the advantages, disadvantages or returns on any of the items I have mentioned--no, someone told you that they aren't a good deal so now you think they are the worst thing ever. YOu are also under the impression that your 'wealth building strategies' are free of charge, they are not. Every investment you make will have some kind of fee attached. Then you tout that you should buy term insurance and invest the rest, which is EXACTLY what a variable life policy does. Do some research. Again, in the long run a simple term policy is MORE expensive then a permanent product. There are people in this world that don't want to have to make choices whether to say in their home or move to an apartment should their partner die. I am not an insurance agent by the way.
Golfgal ... you make absolutely UNFOUNDED ASSERTIONS about who I am and what I KNOW about investment strategies and protecting one's assets.
It's patently obvious that everytime someone on this forum needs (or thinks they do) some insurance that you immediately select an insurance policy that will build cash value instead of seeking to meet their real needs. In my view, the only person you're looking out for is earned income for the agent. You're certainly not doing the OP any favors with your viewpoint. In the case of this OP, there's a serious question about even having a real need to cover the whole amount of the mortgage, which was well addressed by NewtoCA, too.
I have done extensive research into how to best place my money and achieve my investment goals, with at least 10 capable & knowledgeable insurance agents assisting through the years. Some were selling house products, some were independents. All well knew my financial situation and what my needs were.
At no time was an insurance policy a "better value" for my investment goals in foresight or hindsight.
I am well aware of the costs of investing in other markets for my goals, and factor those costs into my returns. I invest in real estate, tax-free bonds, stocks, securities, and taxable/load funds ... and all have done better than any insurance policy I've seen.
Oh, and as a young man (in my 20's), I did buy a policy such as you advocate, based upon the sales pressure of a trusted friend who was just getting into the insurance industry (as were the rest of her family for generations) on the paranoia of buying now to protect my insurance needs in the future. (Or was it because I could "lock in" lower rates based upon my younger initial purchase age then before I really would need life insurance later when I would have a family?) Based upon her advice, I wound up buying policies that were supposed to be the "best" at the time, and then as interest rates changed and products changed, she'd come to me with a "roll-over" into another product. The net result after all the years and changes was she made her earned commissions and I had a net cash value of about $4,000 (whole life, universal life, etc ... you know the gyrations through the 70's and 80's these products went through) which was a lot less if I'd have invested my money in a passbook savings account and bought an appropriate amount of term life if/when I needed it during the same time period. You should appreciate that a passbook savings account would be a whole bunch less ROI than what I could make in other vehicles through that same time period. When I realized how badly I'd been screwed and needed the cash for other investments, I took out the cash value and moved on ... after over 20 years with my trusted friend's insurance programs. She'd also sold me my insurance for cars, airplanes, houses, motorcycles, boats, business, etc.
Anyway, folks here don't need to take my word on it re the poor value of insurance as a wealth building vehicle. Reasonable resources, ranging from Consumer Reports to virtually every financial advice magazine published .... counsel to purchase term life to meet your actual needs and to invest your money in other vehicles.
Frankly, golfgal ... I'd bet someone on this forum could be needing automotive insurance and you'd be touting some form of investment insurance product for that if it was offered ....
PS, Golfgal ... you'd be hard pressed in your attempt to paint me as an unknowledgeable person regarding investments, insurance risks, and prudent financial decisions ... just listening to hearsay from others with no knowledge about what your industry has for products.
In view of the FACT that my employment and work history is that of a blue-collar worker, I've saved and invested prudently (for the most part) and I now have a net worth in mid-7-figures.
I could have "retired" at age 50, and never worked another day in my life. I choose to continue my career path, and am now a manufacturer's rep as well as a farm/ranch operator here in Wyoming.
I have no debt, own my own fleet of vehicles, including cars (multiple MB, BMW, AlfaRomeo, Ford, Subaru), trucks, motorcycles (MG, Ducati), airplane(Cessna), boats ... oh, and the farm/ranch is paid for in full along with my 6 bedroom/3bath second home on a live stream in Vail, CO. My auto insurance agent loves me as a client ....
My bank thinks I'm a "high net worth" client.
My financial resources include legal, accounting, investment, insurance, and business relationships going back up to 40 years.
It's not bragging if it's true ....
If I fit your professional profile of an uniformed and stupid investor making ill-advised decisions from the viewpoint of an insurance agent selling cash value policies, then I've got some bad news for you in your service business.
Last edited by sunsprit; 06-27-2007 at 11:06 AM..
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