- The Washington Times - Monday, October 21, 2002

NEW YORK (AP) The surge in home refinancing has created ample opportunity for insurance companies to pitch a form of life insurance that takes care of mortgage payments if you die or become disabled.
Mortgage life insurance policies are attractive to many, and sales are rising, but consumer advocates warn that the added security they provide often comes at a high price.
If you don't die or become disabled before you pay off your mortgage, no benefit is paid from a mortgage life insurance. In general, financially sophisticated homeowners stay away from this type of insurance, said Eric Stein, a spokesman for the Coalition for Responsible Lending in Durham, N.C.
On average, lenders pay out only about 40 cents in benefits for every dollar consumers spend on mortgage life insurance, although they should be paying out about 60 cents, according to the National Association of Insurance Commissioners in Washington. By contrast, regular term life insurance pays out about 90 cents on the dollar.
Mortgage life insurance is "a terrible product," said Robert Hunter, the director of insurance at the Consumer Federation of America in Washington. "It's expensive, and it's not the way to buy life insurance."
These aren't reasons to shun these policies altogether. Because mortgage insurance doesn't usually require a medical examination, those who don't qualify for traditional life insurance might want to consider it.
Before you buy, first take a look at the coverage you already have. If you have a substantial traditional life insurance policy, then you may have enough to cover your mortgage. If not, then now might be the time to get it.
You should consider the amount of your mortgage and how many family members will need to be provided for in the event of your death. Combining all your insurance needs into one policy can save you time and money, Mr. Stein said.
Also, you should realize that instead of buying mortgage life insurance, you usually can just negotiate with lenders to reduce mortgage payments to an affordable level if you become disabled.
Shop around for the best price as well as the right type of insurance.
Until a few years ago, single premium mortgage life under which the homeowner pays a lump sum for the coverage was the most common type of mortgage insurance.
Citigroup Inc., Household International Inc. and American General Corp. said last year that they would stop offering single premium mortgage life insurance.
Instead, most lenders now offer monthly premium mortgage insurance, for which you pay monthly for coverage.

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