Along with monthly mortgage payments, I pay an additional $16 for insurance that will automatically pay off my loan in case of death. It was suggested by the bank representative. I would like to know if getting this insurance was a good idea.
Via the Internet
The product your banker sold you is typically known as mortgage life insurance. Do you need this kind of coverage? Yes. Should you have purchased it from your mortgage issuer? Probably not.
The ideal person to consult on this matter is your life insurance representative, not the banker who issued your mortgage. You may be able to receive a higher amount of coverage (as part of your life insurance policy) while paying less each month.
The time to address the question of how your mortgage will be paid off in the event of your death is when you’re purchasing or reassessing life insurance coverage. When looking into how much coverage you need, you should take a comprehensive look at all the financial obligations your family will face in your absence and cover them accordingly. One option to consider: You could be eligible for the best premiums and most coverage with a 20- to 30-year term life policy, suggests Dwight Raiford, a financial adviser with MetLife Inc. in New York City, for which you would need to submit to a full medical examination. Assuming you’re in good health, you could qualify for a policy that would pay off your mortgage, fulfill your children’s college tuition needs, and allow your family to maintain their current lifestyle by replacing your income if you meet an untimely death. That said, here’s hoping you live long and prosper.
John Simons is the personal finance editor at Black Enterprise.