Last night, an insurance broker visited our house and gave Berta and me some options for mortgage insurance. Basically, we were interested in having at least a portion of the mortgage paid in the case of our death. So we sat for his hour and a half presentation, and now I present some notes of the salient details.
Sometimes companies will offer “accidental death” insurance along with some other thing you’re buying, like credit cards or bank loan or cell phone plan. These policie sound great for the money you pay, but there is a catch. They only pay out if the accident directly causes your death. So if you go to the mailbox and get hit by a car and left for dead, it pays off. But if you die in the ambulance on the way to the hospital, tough luck - that’s improper medical care, not accidental death. After all, you weren’t dead from the accident, right? (!)
There are a few plans to choose from, which are basically combinations of various riders. For example, you can just get a plan old policy - Pay your premium every month, if you die, the policy pays off, the end. But with a special rider, you can have all of your premiums paid back to you if you survive the term of the policy.
Essentially how this works is the insurance company holds on to your money for all that time and earns interest. They’re happy just to make the interest, and give you your money back. It costs a bit more, but assume it costs $10 more a month on a $30 premium, you can either save $3600 and buy the insurance for 30 years at $30 per month, or you can spend $40 per month and get $14400 back at the end of the term. You can see how you’d never be able to turn that saved $3600 into $14400 just by investing it or putting it into a savings plan. And if you “activate the policy” - an insurance euphamism for “die” - then you get the full insured amount.
The odd fact of the matter is that only 8% of people who buy insurance ever use it. So there’s a pretty good chance that we’d live out the term of the policy and get all that money back.
