May 7, 2010, Newsletter Issue #15: Mortgage Protection Policies: Unilateral Contracts

Tip of the Week

Mortgage Protection Policies are considered unilateral contracts. That means that the insurer is the only party in the contract who has an obligation that is enforceable. Now, that does not mean that you can avoid paying the premium on your Mortgage Protection Policies and still get a death benefit; it simply means that you're not obligated to pay the premium if you no longer want the death benefit.

A life insurance policy is an intangible product. Unlike a car or home, you can simply stop paying your Mortgage Protection Policies and walk away from them. If you do, the policies will lapse and will no longer be in force. That means you will not receive a death benefit when you die. Additionally, since term insurance policies have no cash values, there will be no value within the policy that you can redeem. While it is possible to, it is generally not a good idea to allow your policy to lapse, because it leaves you exposed to risk and because a new policy, at your advanced age, will be more expensive.

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