The Matthew EffectFull Article
3 posts match your search for Mortgage Protection
Mortgage protection insurance seems like a great idea… on paper.
Afterall, you financially protect your home, your car, your health, and your life with insurance. Why not do the same for what’s typically your largest debt obligation?
But a MPI policy might not be the best way to help your family pay off the house.
Here are three questions you should ask before you buy mortgage protection insurance.
Will my payout change?
The fundamental weakness of most MPI policies is that their payout decreases over time. As you work down your mortgage, there’s technically less to protect.
That becomes a problem if your premiums don’t change even as your payout plummets. You’ll be paying the same amount for less protection!
Ask about policies that feature a level death benefit. They’ll provide you with the same amount of death benefit regardless of how much is left on your mortgage.
Will my premiums change?
Premiums for MPI aren’t always fixed. The amount you pay for protection each month might decrease or skyrocket. Your wallet is at the mercy of your insurance provider!
Just remember that fixed premiums might be a double edged sword. It may be useful to have a policy with premiums that lower over time if you don’t have a level death benefit. Ask about fixed premiums for your MPI before you find yourself paying more for less!
Would life insurance be a better option? (hint: the answer may be yes)
Term life insurance may be a better choice than MPI. Payouts are guaranteed by the insurance company and premiums are fixed. You won’t have to worry about paying more for less protection as the years go by.
It’s also flexible. A chunk of the death benefit may knock out the mortgage, while the rest can fund college, health care costs, and living expenses.
There are special circumstances where MPI is superior to term life insurance. It typically doesn’t have medical restrictions, making it a good option for people who normally wouldn’t qualify for term life insurance. Just remember to ask your financial professional these questions if you decide to learn more!
This article is for informational purposes only and is not intended to promote any certain products, plans, or insurance strategies that may be available to you. Before taking out a policy, seek the advice of a licensed financial professional, accountant, and/or tax expert to discuss your options.
There are plenty of reasons for not buying life insurance. There just aren’t many good ones!
Every year, Life Insurance Marketing and Research Association (LIMRA) collects data on why people aren’t buying life insurance. Here are the three most popular objections to owning life insurance and a few points to consider if they’re stopping you from protecting your family.
“Life insurance isn’t that important.”
This is the #1 reason Americans don’t buy life insurance. 67% say they have other financial priorities.¹ And there’s an extent to which that’s understandable! Your mortgage, car payments, and college tuition are incredibly important for the wellbeing of your family. They’re the building blocks of your lifestyle and empower your loved ones to pursue their dreams.
But life insurance helps ensure that your family can meet those financial obligations and maintain their lifestyle, no matter what. It replaces the income they would lose if something were to happen to you unexpectedly. Life insurance is important because you have other financial priorities!
“Life insurance is not affordable.”
65% of Americans think they can’t afford life insurance.² But it’s incredibly common to overestimate the cost. LIMRA found in 2018 that 44% of Millennials thought life insurance was 5 times more expensive than it actually was.³ To put things into perspective, a healthy, smoke-free 25 year old can expect to pay about $31 per month on life insurance.⁴ That’s roughly the same as subscribing to several streaming services combined.⁵ A young person can protect their financial future for the same monthly cost as binging their favorite shows and movies.
“Do I really need life insurance?”
The third most common reason Americans don’t have life insurance is because they don’t think they need it. There are many reasons for this. Maybe you’re thinking some of these yourself. “I’m young and healthy, I don’t have a family,” and the list goes on. A 23 year old without financial dependents like a spouse, aging parent, or child might legitimately have bigger financial fish to fry. But anyone with people in their lives that depend on their income to make ends meet and to pursue their dreams should have life insurance coverage. It’s not about how healthy you feel or how much you’ve saved up. It’s about protecting your family regardless of what life throws your way. Would you skip out on car insurance because you’re a good driver? Or ignore homeowners insurance because you have a fire extinguisher?
So the question now becomes, why don’t you have life insurance? Did any of these objections ring a bell? I would love to talk sometime about your concerns around securing the right protection for your family!
¹ “Is Life Insurance Tomorrow’s Problem? Findings from the 2020 Insurance Barometer Study,” LIMRA, https://www.limra.com/en/newsroom/industry-trends/2020/is-life-insurance-tomorrows-problem-findings-from-the-2020-insurance-barometer-study/
² “Is Life Insurance Tomorrow’s Problem? Findings from the 2020 Insurance Barometer Study,” LIMRA
³ “9 common life insurance myths debunked,” Policygenius, https://www.policygenius.com/life-insurance/common-life-insurance-myths-debunked/
⁴ “Average Cost of Life Insurance (2022): Rates by Age, Term and Policy Size,” ValuePenguin, https://www.valuepenguin.com/average-cost-life-insurance
⁵ “Americans already subscribe to three streaming services on average. Is there room for more?,” allconnect, https://www.allconnect.com/blog/average-american-spend-on-streaming#:~:text=One%20poll%20from%20The%20Hollywood,at%20just%20over%20%2414%2Fmo.
Some could say “never!” but there might be situations in which using a credit card may be the option you want to go with.
Many families use credit with good intentions – and then life happens – surprise expenses or a change in income leave them struggling to get ahead of growing debt. To be fair, there may be times to use credit and times to avoid using credit.
Purchasing big-ticket items.
A big-screen TV or a laptop purchased with a credit card may have additional warranty protection through your credit card company. Features and promotions vary by card, however, so be sure to know the details before you buy. If your credit card offers reward points or airline miles, big-ticket items may be a faster way to earn points than making small purchases over time. Just be sure to have a plan to pay off the balance.
Travel and car rental.
For many families, these two items go hand in hand. Credit cards sometimes offer additional insurance protection for your luggage or for the trip itself. Your credit card company may offer some additional protection for car rentals. You might score some extra airline miles or reward points in this category as well because the numbers can add up quickly.
Credit card and debit card numbers are being stolen all the time. Online merchants can have a breach and not even be aware that your credit card info is out in the wild. The advantage of using a credit card as opposed to a debit card is time. You’ll have more time to dispute charges that aren’t yours. If your debit card gets into the wrong hands, someone might be quickly spending your mortgage money, food and gas money, or college tuition for your kids. Credit cards may be a better choice to use online because the effects of fraud don’t have an immediate impact on your bank balance.
Life happens and sometimes we don’t have enough readily available cash to pay for emergencies. Life’s emergencies can range from broken appliances to broken cars to broken bones and in these cases, you may not have any other viable options for payment.
Using credit isn’t necessarily a bad thing. In fact, if you plan carefully, you may reap several types of benefits from using credit cards and still avoid paying interest. You’ll have to pay off the balance right away to avoid finance charges, though. So, always think twice before you charge once.
Some credit cards offer consumer benefits, like extended warranties, extra insurance, or even rewards. There are some situations in which using a credit card may come in handy.