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Mortgage Life Insurance & Mortgage Redemption And Cancellation Life Insurance
By: Donald Lusan
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?
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
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