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Path: utzoo!linus!philabs!cmcl2!harvard!bbnccv!ima!johnl
From: johnl@ima.UUCP
Newsgroups: net.invest
Subject: Re: Mortgage Insurance
Message-ID: <109000010@ima.UUCP>
Date: Tue, 29-Oct-85 17:20:00 EST
Article-I.D.: ima.109000010
Posted: Tue Oct 29 17:20:00 1985
Date-Received: Fri, 1-Nov-85 02:00:47 EST
References: <1229@mhuxt.UUCP>
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Nf-From: ima!johnl    Oct 29 17:20:00 1985


> Does anyone have any comments on the worth of mortgage insurance?

Mortgage insurance is worthless.  (There, that was simple, wasn't it?)
More specifically, the idea is that if you drop dead, the insurance pays off
the mortgage.  That's all well and good, but if that's what you're worried
about, you're invariably better off increasing your regular term life
insurance by the amount of the mortgage.  (I know, the mortgage amount
shrinks every year, but for the first years it doesn't shrink by much, and
by the time it does the amount of the mortgage is less worrisome.)

Mortgage insurance preys on more or less the same fallacy as airplane flight
insurance.  Sure, there is some likelihood of a plane crashing or of your
heirs having a large mortgage to pay off, but the right way to deal with it
is by your "general case" life insurance rather than by "special cases" that
always cost more.  Your heirs are no worse off if you are killed in a plane
crash than if you drown in the bathtub, similarly they can use proceeds from
any old insurance to pay off the mortgage, and save money and have more
flexibility in the bargain.

Many lenders require mortgage insurance, which just reminds you that it
protects their interests far more than yours.

John Levine, ima!johnl

PS:  I suppose you should increase your disability insurance, too, but that's
usually packaged in with the life insurance.