Do I need mortgage life insurance?
by Mortgage Rates on Monday, October 11th, 2010 | 4 Comments
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Throw that away.
And please don’t fall for every scam you will be getting in the mail.
Next you’ll be getting one that charges you an annual fee for paying your mortgage off in bi-monthly payments and you’ll probably fall for it.
Get your credit reports from
annual credit report.com
Look in each bureau for the words OPT OUT
Opt out of these junk mail services or you will get it for a lifetime.
Will:
Make sure there are beneficiaries in all your savings and checking accounts.
This will superceed (overide) anything in a will.
In a will do list your accounts.
Go to your library or bookstore and get a book on wills.
I found Quicken Wills & Trusts.
It had a cd in it – I plopped it in and filled out the forms.
Took about 20 minutes.
Went back to the library (banks also notorize) and got it notorized for free.
Send a copy to your parents and keep on in a fire proof box that you will buy from walmart for about 27 bucks and keep in your closet along with your life insurance policy and house insurance papers.
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You probably don’t need it.
If you died right now, AND your parents are your only heirs and want to keep the house, they can use the money from your term life to pay it off, then do whatever they want with it. OR, they can let the house get reposessed – your debt is not inheritable.
Mortgage life, is basically just a decreasing term life insurance policy, which costs MORE than a regular term life policy, that pays the lender. Let them buy their own coverage. If you want life insurance (which apparently you do), let it pay whoever you want to leave the money to, and they can spend it any way they want. I don’t EVER recommending buying life insurance that pays the lender. Any unpaid debts are THEIR problem, not yours, and debt is NOT inheritable.
If you DO buy it (remember, decreasing value, level premium, more expensive than straight term which DOESN’T decrease in value), and die, then your house gets paid off. Whoever inherits it in your will, gets a paid for house.
You have no dependents. I’d argue that you probably don’t even need TERM insurance, if you have enough money in the bank to pay for your own funeral and not saddle your parents with the costs.
Never buy mortgage life. If you have term life make sure it will last the amount of years that you need it. If it doesn’t just reapply for a new term life that will last as long as you need it.
You have no beneficiaries is a bad idea. You need to leave the home to someone and the life insurance to someone too. Otherwise the state gets to keep everything. Make sure you name a person or a charity and you have a “Successor Beneficiary” on your life insurance policy in case something happens to the primary beneficiary.
And you should have a “trust” so you can name who or what charity you want everything to go to if something does happen to you.
Mortgage life insurance are ripoffs. Basically its a decreasing term policy where you pay level premiums, but the coverage goes down every year. The coverage amount will almost equal to the amount you owe on your mortgage. So it will cover your mortgage, but what if you have other debts and financial obligations in the future such as children? This life insurance won’t be able to cover them.
I don’t want to give you any suggestions on what to do, but if I was in your position, I would increase coverage on my current term policy. Sounds like to me you have a 30 year term right now. I would get coverage of 8 to 12 times of my annual gross income. If I earn $40,000/year at my job, I would get around $400,000 coverage. I’m currently 27 years old and I’m perfectly healthy. So this would cost me around $390/year. I don’t know whats your mortgage balance is, but this coverage probably will be enough to pay it off. If you die, your parents get the money. The mortgage gets paid off and your parents own your home. They may not want to live there, but they can always have people rent it or sell it. Either way, they will get a nice big chunk of income to fund their retirement.
If you don’t have life insurance or don’t have enough coverage to pay for it and some day you die, the bank will take posession of your home.