Your home is more than just walls and a roof. It's a place where a lifetime of memories is made. That's why you work so hard to manage the monthly mortgage payments and protect it with homeowner's insurance. But, are you aware that your mortgage probably needs protection, too?
If you're a two income family that depends on both paychecks to support your household, would your family be able to make the mortgage payments if one of your incomes were gone? There are many ways that life insurance could help protect your family from experiencing the financial stress of falling behind on payments, or worse, risk losing their home to foreclosure, if you were to suddenly pass away.
Here's what you need to know about using life insurance to help preserve your family's home for future generations.
Term life
A term life insurance policy can be an affordable way to protect your home mortgage. Many insurers offer 20, 25, and even 30 year term policies, so it's easy to select a policy that coincides with the length of your mortgage term. For example, if you have a 15-year mortgage loan at $150,000, you might consider a 15-year term policy with a death benefit of $150,000. If you were to die, the death benefit is paid to your beneficiaries, who can use the money any way they like, including paying off the mortgage.
Permanent life
Permanent life insurance (such as whole life or universal life) is another good option for mortgage protection. Much like term insurance, you can buy a policy with a death benefit equal to your home loan (or any other amount), and when you die, the proceeds go to your beneficiaries to use any way they want. The main difference is that a permanent policy won't expire after a certain term, and the potential to build cash-value over time can be an added bonus.
Making the right choice
Using life insurance to protect your mortgage is not the same as private mortgage insurance (PMI) or meant to replace it. PMI is insurance lenders can require if the down payment on your home doesn't meet a certain threshold (typically 20 percent). PMI has nothing to do with death or disability and is meant to pay off your lender if you were to default on your loan. The premiums are paid by you, the borrower, and it's a product that's purchased through your lender.
A home purchase means a great deal of financial responsibility. Don't risk your family losing it to foreclosure if you were to suddenly die. If you're undecided about what type of life insurance you should consider, speak with a qualified life insurance agent, who will look at your individual needs and help you find the policy that's right for you - and the place that you call home.
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