I just bought a new house, and I’ve been inundated with mailings from companies offering credit insurance, which will pay off my mortgage if I die. Should I get it?
In most cases, credit insurance is a bad deal. This type of insurance, which is pitched to you if you buy a house or refinance, offers to pay off the outstanding balance of your mortgage or loan if you die. The problem is that these policies tend to be very expensive for what you get. Plus, they limit your heirs’ options for the life-insurance money: Your heirs may have other priorities than paying off the mortgage, especially one with a low, fixed interest rate.
“What we have learned over the years is that insurance that is offered in conjunction with a sale of other products is often way overpriced and frequently not needed at all,” says Robert Hunter, the director of insurance for the Consumer Federation of America and former Texas Insurance Commissioner. One of the problems with insurance sold with a loan is “reverse completion -- the salesperson is selecting the insurance company, and you aren’t,” he says.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Instead, most people can get more insurance at a lower price by shopping around for a regular term life-insurance policy themselves. A healthy 40-year-old man can buy a 20-year, $500,000 term life-insurance policy for less than $400 per year (a woman the same age could pay less than $360). And your heirs can determine the uses for the death benefit. You can get price quotes from dozens of insurance companies at www.accuquote.com or www.lifequotes.com. See How Much Life Insurance Do You Need? for more information about buying life insurance.
However, if you have medical issues and are unable to qualify for life insurance on your own, you might want to consider credit insurance. You may be able to get it even though you’ve been rejected for life insurance because of your health.
-
How to Think About Money and Aging NowAs you think about your financial future in this new age of longevity, a strong plan means more than just asking if you have enough.
-
While Winding Down From the Holidays, Many Wind Up for DivorceJanuary is known as Divorce Month for a reason. Here's how women in particular can protect their financial future, especially when going through a gray divorce.
-
Credit Report Error? They All Mattercredit & debt Don't dismiss a minor error. It could be the sign of something more serious.
-
Insurance for a Learning Driverinsurance Adding a teen driver to your plan will raise premiums, but there are things you can do to help reduce them.
-
529 Plans Aren’t Just for Kids529 Plans You don’t have to be college-age to use the money tax-free, but there are stipulations.
-
When to Transfer Ownership of a Custodial Accountsavings Before your child turns 18, you should check with your broker about the account's age of majority and termination.
-
Borrowers Get More Time to Repay 401(k) Loans
retirement If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.
-
When It Pays to Buy Travel Insurance
Travel Investing in travel insurance can help recover some costs when your vacation gets ruined by a natural disaster, medical emergency or other catastrophe.
-
What Travel Insurance Covers When Planes Are Grounded
Travel Your travel insurance might help with some costs if your trip was delayed because of the recent grounding of Boeing 737 Max planes.
-
Ways to Spend Your Flexible Spending Account Money by March 15 Deadline
spending Many workers will be hitting the drugstore in the next few days to use up leftover flexible spending account money from 2018 so they don’t lose it.
