2-Minute Money Manager: Should I Buy Mortgage Life Insurance?

New home
Photo by Andrey_Popov / Shutterstock.com

Welcome to the 2-Minute Money Manager, a short video feature answering money questions submitted by readers and viewers.

Today’s question is about insurance; specifically, a type of insurance that promises to pay off the mortgage in the event of your untimely death.

Watch the following video and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.

You also can learn how to send in a question of your own below.

For more information on this topic, check out “7 Painless Ways to Pay Off Your Mortgage Years Earlier” and “14 Insurance Products That Are a Waste of Money.” You can also go to the search at the top of this page, put in the words “mortgage” or “insurance” and find plenty of information on just about everything relating to these topics.

Also, remember that if you need anything from a better mortgage to help with debt, you’ll find it in our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, and welcome to your 2-Minute Money Manager. I’m your host, Stacy Johnson, and this two-minute answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Today’s question comes to us from Jennifer:

“My boyfriend and I are buying a house together. I recently heard about something called mortgage life insurance. What’s the difference between mortgage life insurance, and regular life insurance?”

Jennifer, here are three things you need to know:

Thing No. 1: It’s insurance that’s tied to a specific debt

Mortgage life is a subset of a category of insurance called “credit life.” Credit life is life insurance tied to a specific debt. It could be a credit card, a car loan or — in this case — a mortgage. It’s simply life insurance that pays off a specific debt if you should die while there’s still a balance.

As we all know, regular life insurance pays a death benefit if you should die within the term of the policy. In the case of life insurance, your beneficiary receives the death benefit. In the case of credit life insurance, the death benefit goes to a lender to retire a debt.

Thing No. 2: The pros of credit life

If you can’t qualify for any other kind of insurance due to poor health or other reasons, credit life offers a way to extinguish a debt if something should happen to you. Also, you typically don’t have to get a physical to prove you’re healthy, as you do with regular life insurance. So, credit life is less hassle.

Thing No. 3: The cons of credit life

There are several disadvantages associated with mortgage life insurance. One thing I really hate about this stuff: You’re paying a level premium every month, but your mortgage is getting smaller. If your debt is declining, shouldn’t the money you’re paying to insure it every month also decline?

Another thing I don’t like: It’s typically more expensive than regular term life insurance. If you’re healthy, you’ll find term life insurance for less than you’ll pay for credit life. Granted, you may have to endure a physical for regular life insurance, but insurance physicals aren’t that big a deal and the savings could be significant.

A final problem with mortgage life: If you die, the proceeds of your policy will bypass your heirs and go directly to your lender. Remember, this is insurance to pay off a mortgage, not to otherwise provide for your family. With regular life insurance, your beneficiary gets the proceeds and uses the money as he or she sees fit. Maybe the beneficiary will pay off the mortgage, but maybe there are other bills that are more important. In short, regular life insurance is more flexible.

Bottom line? Get term life insurance if you can. If you can’t — that is, if you can’t qualify for insurance because of a pre-existing health condition, and really feel the need to protect your family from a mortgage debt — maybe take a look at mortgage life. But make it a last resort.

Want to learn more? Go to MoneyTalksNews.com and do a search for “insurance.” That’s your answer for today. Meet me right here next time!

Got a question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter, just as you would with any email in your inbox. If you’re not subscribed, fix that right now by clicking here. It’s free, only takes a few seconds, and will get you valuable information every day!

The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our Facebook page. And if you find this information useful, please share it!

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
9 Items Under $25 That Will Keep Your House Clean
9 Items Under $25 That Will Keep Your House Clean

We’ve rounded up some of the best products for cleaning your bathroom, kitchen and every other room.

5 Ways Retirees Can Lower Their Income Taxes
5 Ways Retirees Can Lower Their Income Taxes

Here’s how to keep Uncle Sam’s mitts away from your nest egg.

70% of Older Adults Botch This Basic Retirement Question
70% of Older Adults Botch This Basic Retirement Question

Can you answer this fundamental retirement income question?

3 Ways to Downsize Your Life to Save Money, Time and Stress
3 Ways to Downsize Your Life to Save Money, Time and Stress

Downsizing can cut the bloat in your finances — and give you more free time and less stress.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

17 Surprising Things You Can Sell for Extra Money
17 Surprising Things You Can Sell for Extra Money

You probably don’t realize these items are worth decent cash.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

8 Federal Income Tax Breaks for Homeowners
8 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

10 Types of Retirement Income That Are Not Taxable
10 Types of Retirement Income That Are Not Taxable

There are lots of things Uncle Sam can’t touch — so long as you play by the rules.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

These 5 States Are the Most Expensive Places to Retire
These 5 States Are the Most Expensive Places to Retire

If you expect to have modest retirement income, you may want to avoid spending your golden years here.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.