Mortgage Insurance Is A Ripoff

Dave doesn't want Robert to fall for the gimmick that is mortgage protection insurance.

QUESTION: Robert and his wife just had a baby and bought a house. They’ve been getting calls to take out mortgage protection insurance, to pay off the mortgage if they die. The mortgage is $114,000 and he’s 26 years old. Dave tells him why he shouldn’t even bother with it.

ANSWER: That’s a ripoff. At your age, you can buy 20 years of term life insurance for $12 or so a month if you are healthy. Mortgage insurance is nothing more than term life insurance that pays off the mortgage. Your wife could use that term life insurance money to pay the house off. Sometimes with mortgage insurance you can get guaranteed issue if you become sick, but other than that it’s just a racket. They put the word mortgage in front of life insurance and make it 4 to 10 times more expensive. Have term life insurance not just to pay the mortgage but also 8 to 10 times your income.