Mary Hunt: Mortgage insurance? Not on your life!

DEAR DONNA: Mortgage protection insurance (not to be confused with private mortgage insurance or PMI) is really life insurance with a specific provision that if paid out upon the death of the insured, the proceeds must go to pay off the mortgage.

I do not recommend that anyone agree to this type of insurance for two reasons: It's pays only the outstanding balance on the mortgage, which is declining every month, while the high premium stays the same. That's a bad deal.

Second, if the homeowner were to die, the proceeds of that policy will be paid directly to the mortgage holder. The surviving spouse will have no option in the matter. But that might not be advisable given that survivor's financial situation. What if the mortgage is now that survivor's lowest interest debt? Or his or her financial counselor suggests there are much better places to use or invest that money than in paying off the mortgage? So rather than specific insurance that covers only the mortgage, I recommend term life insurance in an amount sufficient to replace his or her income for at least five years, including the cost of carrying that mortgage.

Now, if that policy pays out, the surviving spouse has options to pay off more toxic types of debt (like credit card debt or student loans), pay off the mortgage or invest it. Or some combination thereof.

DEAR MARY: Many years ago, you wrote about direct purchase stocks (DRIPS). I would love to get resources or updated information on companies that offer DRIPS. — MARY, CALIFORNIA

DEAR MARY: As you suggest, many publicly traded companies allow investors such as yourself to invest directly with the company without going through a stockbroker or paying a sales commission on the transaction. DRIP is an acronym for dividend reinvestment plan, but DRIP also describes the way the plan works. With DRIPs, the dividends that an investor receives from a company automatically go toward the purchase of more stock, making the investment in the company grow little by little.

These programs do not require an investor to purchase whole shares. A person could, for example, buy $25 worth of stock in the company on a regular schedule, like once month. That might purchase only a portion of a share, but that's OK. The corporation keeps detailed records of share ownership and dividends paid. Companies that offer their stock through a DRIP plan really do want you to buy directly from them, starting with just one share.

To learn more about how to get started investing in DRIPS, including a specific information on companies that offer these programs, I recommend learning all you can at DirectInvesting.com.