Term of The Week
Aggregate Limit - Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.
In a health insurance policy the aggregate limit is the lifetime benefit. Usually $1, $2, $5 million.
Some policies also have an unlimited benefit.
We recommend at least $5 million in benefits.
Larry's Tip of The Week
Interest rates are low, there are some great discounts if you are in a position to buy a home. So you meet with Cheryl Watson, who advertises on this show, a trusted residential real estate agent.
After you move into your new home you are going to get bombarded with letters offering mortgage life insurance. These will look like very official letters from your lender. You may even get a letter from your mortgage company. All these letters belong in the junk mail bin. Regardless of who sent them.
Sure it sounds good and in theory it makes sense. You just made perhaps the largest purchase of you life. Wouldn’t it make sense to protect this investment if something happened to you and you lost your income due to an untimely death. Who would pay the mortgage?
These are some of the problems.
Often times your are only covered for death due to an accident
In the cases where there is coverage for any loss of life the beneficiary is the mortgage company. Benefits are not paid to your family. Benefits also decrease over time as the amount of the mortgage decreases. However, the premiums do not decrease. They stay the same.
The coverage has no flexibility. It is not portable. If you sell your home, you loose the insurance
The coverage is generally much more costly than if you purchased coverage on your own through a private insurance company.
So, If you own mortgage life insurance, what happens when you die. It pays off the mortgage. Great, but what about the rest of the monthly bills. The car payments, Childcare, other loans and debts? These still have to get paid too. The mortgage isn’t everything!
For the same premium or less, that you spend on the mortgage life policy you could own a pure life insurance plan that will pay a lump sum of money to your beneficiary. This offers flexibility because you retain all the money and make all the decisions. You can add enough insurance in the policy to cover other debts and income needs. You can add coverage for a child’s college education.
You also add flexibility and portability. The policy belongs to you, not some mortgage company. You receive the proceeds. You may choose to not pay off the entire mortgage amount and invest some of the money.
As the balance of the mortgage goes down, you still own the original amount of life insurance protection. If you choose to decrease the face amount of your insurance then the premium will decrease.