Two weeks ago I received an email from Jennifer L. of Dayton, OH who asked, “Is mortgage protection insurance a scam?” She and her husband recently purchased their first home… and they’ve been bombarded (as she put it) with mail solicitation for mortgage protection insurance, and she wanted to know if it was legit or just a scam. I know exactly what she’s talking about as I also purchase a home in September of last year and received the same bombardment of mail.
After 24 years in the financial services industry, my perspective on what is called mortgage protection insurance, or insurance in general, is maybe different than most. Working with client families all over the country I can simply tell you that the vast majority of Americans are significantly under-insured… and have little to no knowledge of even basic asset protection.
If you go online and you do a Google search on mortgage insurance or mortgage protection center…you’re definitely not going to be short on reading material. Some of the information is good and accurate, and some of the information will tell you it’s a scam and that you don’t need mortgage insurance.
The bombardment of mortgage protection insurance “junk mail” mailers that Jennifer and I received after purchasing our new homes… generally does not come from any lender or even from the insurance company for that matter. The mailers you receive are generally sent to you by marketing companies who in-turn sale the leads to insurance agents, who in-turn call you to inform you of the benefits of insurance… in this case mortgage protection insurance.
Is that a good thing or a bad thing?
Let’s find out…
Mortgage protection insurance is typically a $50,000 – $250,000 face value tern life insurance policy offered by many “A” rated insurance carriers. The features and benefits of each policy will vary by carrier and state approval. The fact that a particular insurance product is not offered in every state does not mean it’s a bad product or a scam… it simply means it’s not offered in that state… and that’s not an insurance company issue… that’s a state issue.
Term Insurance With Two Types Of Coverage
You should also be aware that the new type of term insurance offered by many of the top “A” rated companies provides two types of coverage in one policy.
The first type of coverage is of course the tax-free death benefit paid to your beneficiaries that gives them the option to pay off your entire mortgage if either you or your spouse were to die in an accident or from any illness or injury.
And the second type of coverage will send you a tax-free check every month to make your mortgage payment while you are unable to work and earn your regular monthly wages or salary because of a long term illness or injury. Don’t confuse this with disability insurance coverage which is offered as a rider at an additional cost.
THIS IS INSURANCE YOU DON’T HAVE TO DIE TO USE!
Think of it like this… if your mortgage lender or bank requires insurance on your home to protect the value of the property from the risk of natural disasters like fire, storms, floods or earthquakes. So doesn’t it also make sense to ensure the homeowner against the risk of death or disability?
So do you need mortgage protection insurance?
Let me rephrase that…let’s take “mortgage protection” out of the picture here…and let me ask you… DO YOU NEED INSURANCE TO PROTECT YOUR FAMILY?
In other words, if you died tomorrow, would your family have the financial means to cover living expenses, which of course includes making the mortgage payment, car payment, household living expenses and any future expenses such as college education if you happen to have children, or would your family lose the home either voluntarily by selling it… or through a foreclosure simply because your family could not make the mortgage payment?
My point is that you should consider your overall financial picture – not just paying off the mortgage…and here’s why:
The Department of Housing and Urban Development, states that more than half of all home foreclosures are the result of either the death or the disability of the homeowner. Keep in mind that people go into foreclosure or bankruptcy not because the bank wants the pay-off, but because the bank wants the next mortgage payment.
In fact 61.2% of all bankruptcies are due to medical expenses – and 78% of them had health insurance. The tern “Health Insurance” is really a misnomer… because it has nothing to do with the condition of your health. It should really be called, “pay a portion of your hospital and doctor bill insurance” because that all it does.
I recently read that over 25 million Americans will survive a heart attack, stroke or cancer this year… and actuarially speaking 70% of all Americans will experience a heart attack, stroke or cancer by the age of 65.
Also, every year thousands of homeowners in their 30s, 40s and 50s are critically injured in an accident or diagnosed with an illness or disease like cancer that either results in their death or results in their permanent disability which keeps them from working and earning an income. Even households with two incomes quickly discover that they can no longer afford the mortgage payment on just one salary.
The fact is, we are all at risk, every one of us for an untimely death… or a permanent disability from a critical injury or serious illness that results in the loss of our monthly income.
So how can you protect your family’s home and financial wellbeing from the risk of your death or disability?
With life insurance, plain and simple – and I don’t care what you call it. Let me say that again, I don’t care what you call it… I don’t care if you call it “mortgage protection insurance”… or “keep my family in the lifestyle they’re accustom to insurance” or “pay my child’s college education insurance” or “give my wife peace-of-mind insurance” or “keep my wife from having to put on a mini skirt and start dating again insurance.”
It doesn’t matter what you call it… what matters is what it does!
Like most people, Jennifer L. who is in her early 30s had limited knowledge on how to protect her family’s financial wellbeing. She and her husband have great jobs, two young children in elementary school and future goals to pay for their kids’ college education and plan for a safe and secure retirement. She felt that paying less than $25.00 per month on a simplified issue term insurance policy to cover a $150,000 mortgage was an expense she didn’t need to make.
I don’t know about you… but let me tell you how my brain works… paying $24.39 per month for ONE HUNDRED AND FIFTY THOUSAND DOLLARS worth of life insurance is a total and complete No Brainer for me. And knowing what I know, if the average industry cost was $100 per month, it would still be a No Brainer for me.
I explained to Jennifer how Mortgage Protection insurance (the kind I would recommend) works:
1. If you die your family gets money to pay off the house
2. The coverage amount will never go down
3. Your monthly payment will never go up as you get older
4. You can keep it in force as long as you want
5. You can cancel it at any time
6. When you pass away, your beneficiary will receive the death benefit entirely 100% tax-free paid directly to them
7. The plan is portable, so if you move, refinance or change homes, the coverage stays with you
8. The plan is simplified issue which means no physical or invasive medical exam (highly recommend)
9. The plan comes with “Living Benefits” that allow you to access the death benefit upfront for critical illness, chronic illness and terminal illness while you’re still living
10. This is Life Insurance “You Don’t Have To Die To Use” – at no additional cost to you
You can call it mortgage protection insurance… I call it Term Life Insurance with LIVING BENEFITS. Out of the 10 point I mentioned, the most important point to me is number 9, which states the Living Benefit pays you while you’re still living – this is insurance you don’t have to die to use.
A friend of mine in Southern California had a client who two and a half years ago at the age of 37 was diagnosed with terminal stomach cancer and was given less than six months to live. The diagnosis came after only four months from the time he purchased his mortgage protection insurance plan with “Living Benefits.” The insurance company paid him about 90% of the death benefit upfront while he was still alive – he and his family received over $344,000 tax-free before he passed away to take care of his family. All I can say is that’s huge!
My friend sent me a copy of the check that the insurance company sent to his client. Email me and I’ll send you a copy of it – if you’re skeptical and you need proof.
If you’re like most people, you’re probably going to have more questions. Naturally this isn’t everything I can tell you about Term Life Insurance with LIVING BENEFITS (aka: mortgage protection insurance). But, if you would like more information on this subject and on the companies I would recommend, you’re welcome to send me an email.
After all, isn’t it better to know that your family will always live safely and securely in the same home, in the same community, with the same friends, neighbors and schools, than to regret that your could have ensured your mortgage but decided not to?
If you have any questions or require additional information please do not hesitate to contact me. I will always do my best to help you or lead you in the right direction.
