Never before has a consumer such as yourself been given so many options to choose from for your family’s protection. So what do you choose, why should you choose it, and what makes it the best plan available for you?
That’s the problem with any industry. You don’t work fulltime learning about the industry. No one expects you to know everything about mortgage protection plans. Heck, the guys presenting the materials to you who work with it every day may not know everything about the plans either. So why should we expect you to make such an important decision on your own? It’s not your fault that there are so many companies offering mortgage protection. At least when buying used cars you have Kelly Blue Book to fall back on for help. With mortgage protection, you didn’t used to have that assistance. Not until now at least.
So, what are the best mortgage protection plans to go with and why? Well, a good rule of thumb is that if you don’t need it, you don’t want it, and you can’t afford it, then you shouldn’t even think about buying it.
You have a house so you need it, but what else do you have that must be covered? Take any other debt that you may have. Maybe you have a car note or two that you are paying on? Maybe there are a few credit cards that the family has a bit of debt on? Say, the worst happened and you lost your life, who is going to pay for your funeral and your family debts if the mortgage protection plan you have only covers the mortgage? What options will your family have? Are you comfortable with them depleting your savings to pay for your debt or maybe even refinance the home that your death had just paid off? What if you have some sort of serious illness such as a heart attack, stroke, or invasive cancer and you don’t die? At that point, your mortgage protection plan will be the least of your worries if it doesn’t adequately cover you. Long story short – you need it.
If you need it, and you do, you better want it. There are also many other additions, or riders, that would be great to get in your mortgage protection plan. So the goal would be to find a nice balance between what you need and what you want that you can comfortably afford, because if you can’t afford it, then it’s not doing you any good.
Now, after you find a policy that suits your needs and wants, you will get a quote on how much it will cost you per month and/or how much it will cost with a single premium payment. This quote tends to be pretty close to what you will have to pay but as we said before, many companies will give you the best quote possible to give you the illusion that the policy is cheaper than it actually is. At this point, you should do a re-assessment of what you should get in your protection plan and only then will you have the perfect plan for yourself.
Although level term plans (premium and benefit amount don’t change-never get a decreasing term plan) may be attractive due to their cheaper price tag, you should really consider one that builds cash value. The reason why that is so important is that if you become unemployed in this economy, your cash value can take over your bill payments for you. With the accumulated cash value, you can accelerate your mortgage and pay it off ten or so years early saving you tens of thousands of dollars in interest paid. The plan will also be permanent so that you can transfer it to any new mortgages without your premium increasing. Follow the steps we outlined in this section with a reputable company and consider my recommendation and you will most definitely have the best mortgage protection plan.
Page 4 Mortgage Protection
DID YOU KNOW? “The average disability claim lasts almost 13 months, and mortgage foreclosures due to disability occur 16 times as often as they do for death.” Financial Planning Association, Medical Issues, http://www.fpanet.org as of February 2007