One of the commonly recommended financial strategies to prepare for Y2K is to start paying bills (particularly the mortgage) several months in advance. That way, in theory, problems with mail, electronic debits, etc. will not jeopardize credit ratings or trigger foreclosures. That makes sense for those that can afford that. Granted, it may not be too big a deal considering we'll all be in the same boat.

Perhaps of greater concern involves the potential economic impact of Y2K that could put alot of folks out of work. Can't pay bills without income.

My question: Is purchasing the mortgage/credit protection insurance policies that are offered by financial institutions for nearly every mortgage or consumer loan a good idea starting sometime in October, 1999?

These policies usually promise to pay if you are out of work or if you are unable to make your payment. Not sure of all of the conditions that are required. I was wondering if anyone knew enough about them to know if it makes sense to sign up and begin making the premium payments some time starting next fall and continue until Y2K impact is known. Once you know your job is secure and things have settled down, you can cancel the policy. Is this a dumb idea?

-- David (David@BankPacman.com), December 14, 1998

Answers

David: I'm not aware of a mortgage credit protection policy covering layoffs, etc. Generally, the popular credit life insurance pays off the outstanding mortgage for your spouse or estate in the event of death (IMHO a poor value alternative to term-life insurance). There is also disability insurance to provide an income stream that would allow you to continue making house payments in the event of illness or accident. Neither of these would seem to provide the protection you are looking for RE: Y2K.

-- Dave (dwood@southwind.net), December 14, 1998.

Strikes me that if the banks fail, all loan data goes blooey. Thus if you borrow $1,000,000 and buy gold, and their computers fail, you have a million dollars worth of free gold (which would probably be worth five million or more now) to compensate for all the other problems..?

-- Leo (leo_champion@hotmail.com), December 14, 1998.

LEO, Nice thought but, if the failure is even REMOTELY soft and orderly, the loans go to an organization like the Resolution Trust Corp and get collected by the US Govt. (It's how the gov't owned a brothel for a while. There were a LOT of red faces but nothing they coul do since I seem to remember it was in Nevada and they are legal in parts of the state!!)

cr

-- Chuck a night driver (rienzoo@en.com), December 15, 1998.