Mortgage life insurance is one of the most important
life
insurance policies a person who owns a home can buy. Since
the ownership of this home is probably the largest investment
for most people it is imperative that your investment be
protected in the event of premature death. I want to take some
time to discuss alternative plans that can be used to do this.
Mortgage Life Insurance
What really is mortgage life insurance. Mortgage life insurance
pays off the balance owed to the bank or mortgage company in
case of your premature death. Let us assume you have a $100,000
25 year mortgage on your house. Let us also assume that after 5
years you have a balance owed of $95,000. Incidentally that
figure is not as impractical as it sounds. Your principal
decreases very slowly in the early years. Back to our
discussion; You now believe you should take out some mortgage
life insurance because you now have a new baby. What you need is
a
20 year decreasing term policy which would usually be
sufficient if you should die anywhere within the mortgage
period. That is what mortgage life insurance is all about.
Some people add the
waiver of premium benefit in case
they should become disabled for at least 6 months the life
insurance company will pay the premium for them. As an
alternative to the decreasing term policy some policy owners use
a
20 year term policy. If that person should die when
there is only $50,000 owed for example, they have a little extra
to put in the pockets of the beneficiary. $50,000 to the bank
and the other $50,000 to the beneficiary. There is another
alternative if you have some cash to play with.
Mortgage Redemption And Cancellation Insurance
Here is how this works. Let us use the above situation as an
example. You are at the 5 year point just like in the mortgage
life insurance example. What you do is buy a whole life or
variable life insurance policy for $95,000, which is the amount
owed on the mortgage. You are putting out a lot more premium but
if this works right you will be happy about your decision. If
you die before the mortgage is paid off the insurance policy
will pay it off. Remember your whole life or variable life
policy accumulates cash value. There are no guarantees, but at
some time between the 5 year point and the 25 year point the
cash value of your policy will be equal to the amount owed on
the mortgage. You can cash out the policy or take a loan on it
and pay off the balance of the mortgage. You would have redeemed
your mortgage. You now own your house free and clear. Now is
that not a great idea?
Click the link below to learn more about the varying uses of
life insurance.
About the author:
For more than 40 years Donald has been known for his extensive
knowledge of the life insurance business. He has represented
some of the largest and best life insurance companies in the
United States as well as Canada. His advice is invaluable.
Donald's website is:
http://www.lifeinsurancehub.net
