Do You Need Mortgage Life Insurance?

By Mary Pollman – SelectQuote

Home means security – physical and financial. But home also means risk. The mortgage is most families’ biggest liability.

So when we think about how much Life Insurance we need, we usually start out thinking about how much it would take to cover house payments. Our biggest fear is that, without our income, our loved ones may no longer have a roof over their heads – or they may still have a roof, but not of the same quality or quantity.

That’s why Mortgage Life Insurance has such intuitive appeal. I die; my mortgage is automatically paid off. I will have enabled my family to maintain their standard of living. I will have taken care of my spouse’s biggest financial worry.

Why Mortgage Life Insurance is usually a bad idea
Or will I? Maybe my spouse would rather figure out some way to continue making mortgage payments and put my death benefit proceeds into a college fund for the kids instead. Or maybe my family would rather sell the house and get something smaller in order to make my death benefit last longer – buy more groceries, pay more utility bills. They don’t get to make decisions like that if my death benefit automatically goes to the mortgage company.

It’s always a good idea to be a little cautious of narrowly focused insurance – and mortgage life insurance is narrow. It solves just one of the family’s financial problems. If you die, they may have quite a variety of financial problems.

Mortgage Life Insurance has a poor payout record – per the NAIC
There are other issues with mortgage life insurance. The National Association of Insurance Commissioners (NAIC) says that only 40 cents of every dollar spent on mortgage life insurance is ever paid out in benefits. This contrasts with 90 cents of every dollar spent on ordinary term life insurance policies. I can think of at least two reasons for this:

1) The policies are far more expensive than ordinary term life insurance. Whatever the death benefit is, I’ve paid a lot more for it.
2) With many of these products, the policies are tied to the mortgage such that, when the house is sold and the mortgage is paid up in the transaction, the policy ends. I paid the insurance company lots of money in premiums. And I have nothing whatever to show for it.

Should you ever consider buying mortgage life insurance?
So, is the message simply ‘don’t buy mortgage life insurance?’ Not quite. It’s more like ‘don’t buy mortgage life insurance if you’re healthy.’ If you’re not healthy, mortgage life insurance has a big advantage: No physical exam is required. One of the reasons it’s expensive is that it’s very easy to get.

But if you’re healthy, you’ll get better coverage at a far better price with a good 15-, 20- or 30-year level-premium term product. If something happens to you, a) your spouse (instead of the mortgage company) gets the death benefit, and b) your spouse gets a much bigger death benefit for the same premium. So, if the priority is paying off the house, there’s a lot more cash available to do it. AND, there’s cash for other needs, current and future.

Note on decreasing term life insurance
This is a type of life insurance that’s rarely seen in the marketplace these days, but if it is, it’s usually in a mortgage term life insurance product. With a policy like this, your death benefit drops year by year, because it’s pegged to your mortgage – which gets smaller as it gets paid down. But the premium payments don’t go down. They stay the same from day one. The insurance company will say that’s because, though the amount they have to pay if you die is going down, the risk that they’ll have to pay it is going up, simply because you’re a year older. So, they argue, it all evens out. That may be a defensible argument, but it just doesn’t “feel right” to most consumers, and decreasing term has fallen out of favor in the marketplace.

Note on return-of-premium term life insurance policies
We mentioned the NAIC statistic – 40 cents paid out for every dollar paid in on mortgage life insurance. Progressive insurance companies are turning the tables completely, offering term life insurance that pays a dollar back for every dollar you put in – if you live. (If you die, the policy will provide a much better payback than dollar-for-dollar.) If you buy one of these return-of-premium (ROP) policies and hold it to term, the company will have made enough on your premium dollars that they can afford to give them all back to you.

It’s a good idea to consider ROP products whenever you’re shopping for term life insurance. But there’s a neat wrap if you’re buying a policy mainly to offset a mortgage liability. Get a 30-year mortgage. Buy a 30-year ROP term policy. When the 30 years are up, the house is yours and all the insurance premiums fly back home too. Sweet.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

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We can show you a better way to insure your mortgage.
A SelectQuote Licensed Expert can show you excellent alternatives to mortgage life insurance: level-premium term life insurance policies – with and without return of premium – from the highly rated Term Life Insurance companies we represent. Quotes are free. Call toll-free 1-888-739-7965. Or go to our website, www.selectquote.com/home9 .

How To Do Well on Your Life Insurance Physical

The results of your life insurance physical have a big influence on whether you qualify for the best rates. Here are six ways to make sure you do your best.

By Mary Pollman – SelectQuote

If you have been shopping, you already know the life Insurance policies with the lowest prices always require some kind of physical exam.

Life insurance physicals are usually done by parameds. The paramedical firm calls you. You set the appointment. They send a technician to your home or office. The exam is over in 15 or 20 minutes.

Not very difficult. But VERY important. The results of your life insurance physical have a big influence on whether you’ll qualify for the best rates – or even good rates. So you want to do your best on this test.

Here’s how to do your best on your life insurance physical.

1. Schedule the exam for morning, because you should avoid eating or drinking anything, except water, for 8 to 12 hours before you’re tested.
2. Schedule the exam for a place where you’re relaxed. Having it at the office might be convenient, but if you have a stressful commute and the phone starts ringing the minute you walk in the door, don’t do it there. On the other hand, if getting the kids off to school and yourself off to work makes morning at home the most stressful part of your day, a mid-morning exam at the office might be perfect. Being relaxed will mainly impact your blood pressure.
3. Another way to lower your blood pressure reading is to have the exam technician take that last, after they have asked the health questions, taken the urine sample, etc. You’re usually much more relaxed then.
4. Avoid strenuous exercise for at least 24 hours before the exam. If an hour on the Stairmaster or at the gym is part of your daily routine, give yourself the day off. Exercise can temporarily elevate blood pressure.
5. We’ve emphasized blood pressure because your underwriter will. He or she will also zero in on your cholesterol. Eating right for a few days before the exam can make a notable difference in your cholesterol reading. Stay away from fatty foods, rich desserts and alcohol for three or four days. Go for the green leafies, fresh fruits and whole grains.
6. If you take any medications, stay on your regular schedule – including the day of the exam. This advice will seem obvious if you take medicine to control cholesterol or blood pressure, but it applies to any prescription medicine you take.

Good scores on your life insurance physical can really pay off.
For example, for a 45-year-old man, Preferred rates can beat Standard rates by 35-40% with some life insurance policies.* Being rated Preferred can save you hundreds of dollars a year. Your rating is based to a great extent, on the results of your life insurance physical.

By the way, life insurance exams are completely confidential, but you have a right to the results. Just let the company from whom you bought the policy know you want them.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

· We looked at Banner OPTerm 20 at $500,000 as an example. A 45-year-old male would pay $1,205 if rated Standard, $755 if rated Preferred – a savings of over 37%.

*Banner OPTerm 20-Year: OPTerm 10 issue ages 20-80. OPTerm 15 issue ages 20-70. Opterm 20 issue ages 20-65 and 20-62 Oregon only. OPTerm 30 issue ages 20-50 and 20-45 Oregon tobacco classes only. Premium rates vary by coverage amount: $100,000-$249,999, $250,000-$999,999 or $1 million and above. Premiums quoted include $50 annual policy fee. Premiums are guaranteed to stay level for 10, 15, 20, or 30 years, respectively, and increase annually after initial guarantee period. OPTerm policies can be issued in preferred plus non-tobacco (no tobacco use in past 36 months), preferred non-tobacco (no tobacco use in the last 24 months), standard plus non-tobacco or standard non-tobacco (no tobacco use in past 12 months) and standard tobacco classes. OPTerm 10, 15 and 20 substandard policies can be issued through Table 4. OPTerm 30 substandard policies can be issued through Table 12. Coverage can be renewed to age 95. OPTerm policy form #RT-97. Forms and policy provisions vary by state. Not available in all states. Policy descriptions provided here are not a statement of contract. Rates as of 8-14-07. Advertising Compliance #07-082

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Get coaching on your life insurance exam from SelectQuote.
Part of our service is the personal advice we provide our customers – helping them decide what life insurance policy is best for them and then helping them get the best rates for it. To reach a SelectQuote Licensed Expert. Call toll-free 1-888-739-7965. Or go to our website, www.selectquote.com.

Life Insurance: The Five Most Costly Mistakes People Make

Comparing monthly life insurance premiums isn’t enough. If that’s all you look at, you can fall into a number of traps. Here are some of the biggest ones to avoid.


By Mary Pollman – SelectQuote

Buying too much life insurance
This is especially tempting for new parents and new homeowners. Your sense of risk is at an all-time high. So it’s a good time to get out pencil and paper and coolly calculate. What are your expenses? How much are they likely to increase as time goes by? Is there another earner in your family? How much of the expense can they handle without you? Come up with realistic numbers. Do it before you go shopping for life insurance.

Buying too little life insurance
This can be costly, not to you, but to your family. Classic worst-case scenario: Breadwinner dies with little or no life insurance. Nonworking parent has to get a job after years out of the work force; has to pay for child care; sell the house to reduce mortgage payments; cut corners on cars, vacations, clothing, maybe even food; trim plans for the kids’ education. It’s scary, but it happens – way too often.

Buying life insurance for too long a time
Some people think the only kind of life insurance to buy is “permanent.” But permanence costs money. The life insurance company takes extra risk – and charges you for it – because they don’t know how long you’ll live and, therefore, the total premiums you’ll pay vs. the death claim they’ll pay. Many people don’t need life insurance after their kids are through school and their assets have built up. So they don’t have a permanent need for life insurance. Again, it pays to do a little math. Calculate how long before your last child leaves college and think about whether you’re likely to need life insurance (or as much life insurance) after they graduate. (Suze Orman suggests you have life insurance until your youngest child is 24 years old.)

Buying life insurance for too short a time
The danger with not getting a policy that lasts long enough is that it can cost a lot of money to get another one. Assuming you’re in excellent health, 10-year term at 35 may cost you $280 a year for $1 million in coverage. 10-year term at 45, same million-dollar coverage, could be $600 a year – more than 100% higher.* That assumes you’re still in great health. Of course, there’s always the chance your health may change in that 10 years so that life insurance could be much higher – or can’t be bought at any price.

Buying life insurance too late
People do tend to procrastinate when it comes to life insurance. Buying too late can be very expensive. When you start to develop signs of heart trouble, for example, you may suddenly become very interested in life insurance. Unfortunately, that’s when many life insurance companies become uninterested in you. Or, they may take you on as a “special risk” at high prices. If you’re healthy, you may still find that buying too late is costly, because life insurance premiums escalate with age.

Not shopping around
You should do price shopping and “brand” shopping. Brand shopping first. After you have a ballpark idea of what kind of coverage you need, look at quality companies. See what they have that fills the bill. After you’ve narrowed it down to a list of solid options, pick the one with the best price.

Clearly, there are icebergs in these waters. And avoiding the “big five” can be hard to do on your own. What’s really too much life insurance for me? What’s too little? Do I need a policy for 15 years, to cover my mortgage? Or 30 years until I reach retirement?

My advice? Get advice. Do your own homework, but get the advice of a professional, too. Agent commissions are built into the price of a life insurance policy, so get everything you’re paying for.

About the author. Mary Pollman, CLU, has been writing about life insurance, long-term care insurance and annuities for more than 20 years. She has contributed to insurance publications, websites, consumer product literature and agent training. Mary held senior management positions in communications and marketing with two life insurance companies. She is an editorial advisor to SelectQuote.

* Banner OPTerm 10-Year: OPTerm 10 issue ages 20-80. OPTerm 15 issue ages 20-70. Opterm 20 issue ages 20-65 and 20-62 Oregon only. OPTerm 30 issue ages 20-50 and 20-45 Oregon tobacco classes only. Premium rates vary by coverage amount: $100,000-$249,999, $250,000-$999,999 or $1 million and above. Premiums quoted include $50 annual policy fee. Premiums are guaranteed to stay level for 10, 15, 20, or 30 years, respectively, and increase annually after initial guarantee period. OPTerm policies can be issued in preferred plus non-tobacco (no tobacco use in past 36 months), preferred non-tobacco (no tobacco use in the last 24 months), standard plus non-tobacco or standard non-tobacco (no tobacco use in past 12 months) and standard tobacco classes. OPTerm 10, 15 and 20 substandard policies can be issued through Table 4. OPTerm 30 substandard policies can be issued through Table 12. Coverage can be renewed to age 95. OPTerm policy form #RT-97. Forms and policy provisions vary by state. Not available in all states. Policy descriptions provided here are not a statement of contract. Rates as of 8-14-07. #07-081

Avoid the costly mistakes people make when they buy life insurance.
What do you really need in terms of coverage amount and coverage length? Which life insurance companies are best? A SelectQuote Licensed Expert can help you sort it out. We can help you avoid costly life insurance mistakes and give you free quotes from the highly rated Term Life Insurance companies we represent. Call toll-free 1-888-739-7965 . Or go to our website, http://www.selectquote.com/home9