Note: This is NOT the same as Property (Home) Insurance, which is mandatory. “Mortgage Insurance” is actually a type of life insurance which pays the remaining balance of your mortgage in the event of your death. Sounds like a good idea, but digging a little deeper reveals that:
1) Your premiums remain the same, even as your payout decreases over time. (As you pay down your mortgage)
2) As the home owner, you do NOT get to decide where the money goes. If your spouse or co-owner dies, the insurance money goest straight to the bank to pay off the mortgage.
3) Underwriting is done at the time of death. What this means is that if the mortgage insurance company decides that you don’t qualify for one reason or another, you don’t get the payout.
So what is the alternative:
Check out Life Insurance instead. It covers all the 3 above factors. Check with a life insurance agent, and if you don’t have one, call me for a referral….
Read more about this topic here.