Perhaps you’ve been shopping for life insurance and have heard the term “mortgage protection insurance” or payment protection insurance for PPI claims¬†(in the UK), and thought that it sounded like a good idea on the face of it. To leave your beneficiaries with no mortgage payments in the event of your departure would eliminate what is most likely the largest monthly expense they have. But there is a good reason why you should think twice before purchasing this kind of insurance.

Upon receiving a payout amount that will go toward their mortgage, will your heirs also have enough to address other monthly expenses and one-time expenses such as funeral costs? You have a limited amount of money while you’re still alive to pay insurance premiums each month, and allocating too large a share towards mortgage protection insurance might mean your family comes up short relative to their entire set of monthly expenses.

A better strategy might be to simply buy a good term life insurance policy with as large a payout as you can comfortably afford, and simply let your loved ones choose how exactly they want to allocate the funds. This control element is critical: you take control away from them with mortgage insurance.

After all their situation will change should you pass away. It’s possible they will decide to stay in the family home, but if they decide they no longer want to then paying off the mortgage may not be the smartest thing to do financially. No doubt your lender will be very happy that the mortgage was paid off in this case, but the lender is hardly the reason that you’re paying your monthly premiums, is it?

This sort of holistic approach that I’ve described towards addressing the financial needs of your family is one with which most financial planners would concur. This really is not a question of leaving your family with no place to live. Rather it is a decision that you can make to make sure that your family will have their overall needs taken care of because you cared enough to buy the right life insurance.