Mortgage Protection Insurance is a scam!

When I bought my house back in March the weirdest letters kept coming to me. The envelope had my lender’s name on it. Knowing I didn’t owe them a payment I rushed to open it! There it was a letter warning me that I should immediately get mortgage protection insurance. Odd no information stated anywhere that is was my lender except on the outside. In fact, there was no contact information on it anywhere. I started to get a little angry someone would attempt to pose as my lender, this type of communication medium felt like a scam.

You would have thought the letters would have been confined to one. No, not just one I received at least four more. Finally one had a 1-800 number on it for me to call. I called the number to give them a hard time. Of course, I didn’t get anybody to speak to so I am not sure how they planned to maximize this as a lead generator. Months later I did have someone call me trying to stress the importance of mortgage protection insurance, I wasn’t that nice due to all the information I had received from the other lenders.

Other warnings you might be dealing with one of these shady operations is they will have warnings like this on the letter or envelope.

Example Mortgage Protection Insurance Scam Tactics
Mortgage Protection Insurance Scam Tactics

If you just bought a house you are probably getting many of these unethical leads? You are probably pondering if I die I want my family to keep my house but what exactly is mortgage protection insurance? You are correct in thinking that it is not PMI (Private mortgage insurance). PMI is the insurance to cover the difference in cost if your lender had to foreclose on your house if you had an FHA loan.

What exactly is mortgage protection insurance? The irony is it is just life insurance. It’s is life insurance that decreases value through the life of your home loan. It is usually more pricy because of no physical exam required for it. It is not a flexible policy meaning the money will most likely go straight to the lender. The premiums are costly. There is not much transparency because it is not a type of insurance you can get quotes online thus cause the prices to not be similar. The premiums are not fixed so don’t be surprised if you get premiums that continually rise.

The FTC has written warnings about this type of insurance with the questions you should ask before buying it. What is the solution for your family to keep your house if you should die? The solution is simple low-cost term life insurance. There are many policies that can cover your mortgage and then some that are only a portion that mortgage protection insurance costs. In fact, most term life insurance is so cheap that it should pay off the house and other debts you might have if you were to die. Some term policies could even be double the amount of what you would or are paying for your mortgage protection insurance!

If you have just purchased a home you probably want an insurance advisor to speak to about these issues. Don’t hesitate to contact us to discuss term life insurance or any other financial issue that might be bothering you. We promise to find a policy that fits you and your financial goals. You can get a quote directly off our website even before we speak. While you are here check out the article and whether bad credit hurts your life insurance premiums.

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*This article was written by a licensed insurance advisor.