Mortgage protection plans are incredibly important. And they, as you may or may not know, they are term structured life insurance built around your mortgage and it pays off your mortgage in full if you die or if you get diagnosed with a whole bunch of medical conditions (these are called Living Benefits”). Please reach out to us if you want to know what medical conditions are insured. Shorter mortgage protection plans are very risky and they have both pros and cons.
The pro is that it costs less. That’s the only benefit. It costs less to get it. You can get as short as 5 or 10 years mortgage protection plans or if you go through a company like AARP, you can get a one-year renewable term structured policy. They don’t call it mortgage protection.
They’re just going to call it to term life insurance. It’s very risky to get these shorter plans. This is something they will never, ever tell you. This is the reason why you want to get the long-term plan that you can afford. And so even if it’s 10 years, it is 50 times better for you to get a 10-year plan than a one-year renewable plan. And it is 20 times better, 10 times better, significantly better to get, if you can, a 30-year mortgage protection plan instead of a 10-year mortgage protection plan is substantially better.
I could spend three hours on a video just on why it is so much better.
But it protects you. It protects your family.
So here’s the deal. When you get there we’ll start with the one year and then we’ll compare it to a 30 year that we can see the full spectrum, a one-year renewable mortgage protection policy, or a term structured life insurance policy. What’s going to happen is you pay, you know, either monthly or you pay quarterly or you pay each year and every year before the renewal date, AARP or whoever the company is going to be for you, they’re going to assess your account.
They’re going to look at it and they have access to your money. You’ve given them access to your medical database when you set up the policy initially. So they’re going to look at your medical database before that renewal and they’re going to say, does anything new happen? And is this person gone to the doctor as there is anything scary going on? If there’s anything scary going on, it’s not worth the risk. This is what they’re going to say.
So AARP is going to say this is not worth the risk to us to continue to carry this person and pay them three hundred thousand dollars or whatever the amount is if they die. And so we are going to choose to not continue to renew this policy and we’ll send them a cancelation letter.
And they have the legal right to do that one-year renewable. All that means is that assuming they give the green stamp for that year, then they have to go through the full year. If you die within that year, then they are on the hook for whatever the policy mountain is. But every time they have the power, they have the control. They have the authority to say, we’ll put the brakes on, let’s go ahead and get rid of this.
We’re not going to choose to renew this for another year. They have all of the control in that relationship. All they’re indebted to is you for one year, and that’s only if you die and only if you die for whatever they agree to pay you for. Now, let’s go to the other opposite of that 30 years if you can. And this is based largely upon your age.
So if you’re over the age of 50, over 50, or above 50 or above, it’s likely you’re going to have to go with more like a twenty or twenty-five-year policy. But there are a lot of workarounds. There are lots of creative ways that we can get you into a longer policy, even if you’re older. OK, so with a 30-year policy, when you set up that policy, they’re on the hook for 30 years. They cannot drop the policy.
They can’t change the price on you. They can’t require anything further because what they’re doing is they’re saying for 30 years, based on how your health was and your age and everything else before you got the policy the day that you applied, that’s what they’re on the hook for, for a whole 30 years. And typically, those longer policies, they’re going to have much better living benefits, which means not only do they payout if you die over 30 years.
Excuse me. But also, a lot of these living benefits where if you get diagnosed with a whole bunch of health issues, they’ll also pay for those. And typically, there are one-year renewables, they’re just going to be a death benefit that is the most common and that is the least likely reason why these policies will ever payout. The living benefits statistically are a lot more likely to pay, which makes them crucially important. So, yes, you can save some money on one-year renewable mortgage protection.
But I’ll tell you, it is a waste of money. You are throwing money away when you get these policies. Very rarely does it go and the benefit of the insured only when there’s sudden death. So I’m sorry about the bad news.
If you have a one-year renewable term or one-year renewable mortgage protection policy, I hope that you reach out to one of our senior agents and we can at least quote another option for you. Something that protects you is a lot more security for you and your family. So I hope this has been helpful. Please reach out to us with any other mortgage protection questions. We’re happy to help. Take care.