My wife and I just had our first child. Not long before that we bought a house, and since then we've been getting calls and letters about buying mortgage protection insurance. They say it would pay off the mortgage if we die. Our mortgage is $114,000, and we're both 26-years old. Is this a good idea?
No, it's not a good idea. Mortgage insurance is a rip-off, and here's why. This stuff is nothing more than a life insurance policy with the word "mortgage" stuck on the front. They make it sound like a high-end, specialized product, and they jack the price way up! Sometimes you can get guaranteed issue if you become very sick and can't get insurance anywhere else, but other than that it's just a racket.
At your age, if you're healthy, you could easily get $250,000 on a 20-year level term life insurance policy for $12 to $15 a month. Then, if something happened to you, your wife could pay off the house with the insurance money, and still have some left over.
I always recommend a good, level term life insurance policy – not just to cover your mortgage – but for eight to 10 times your annual income. You've got a responsibility to take care of your family now, and in the event that something unexpected happens, and you're no longer around!
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