Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
The main reason would be to have that mortgage paid off if you died so your spouse doesn't have to worry about paying off the debt. Creditors may come after your estate to recoup their mortgage loan to you which can create a very hectic situation for those involved that are handling your estate's affairs.
If there is a surviving spouse, that person often has to make significant changes in their lifestyle choices as they would be losing an income stream to pay off those debts.
replaced - this can be everything from losing your house because the income is not there to pay the mortgage, to pay off the car loans, credit card debts (which can increase rapidly in this case as it's a quick source for people to delay paying immediate bills, but
draws substantially large interest rate charges and can put that person into even bigger debt).
So why use your own money to pay off your debt when you can use someone else's (the insurance company)? The idea is to pay pennies on the dollar instead of dollar for dollar by having a life insurance policy in place to cover the mortgage (a term life insurance policy would be sufficient since a mortgage is only designed to exist for 15 or 30 years (or other time frames depending on how your type of mortgage).
If you're looking to cover other debts or provide an income stream for your surviving spouse, then either a larger term life insurance policy is needed, different term lengths (e.g. part 20 year term insurance, part 30 year term insurance), or adding a portion in as permanent life insurance (Guaranteed Universal Life vs. Whole Life).
If you would like to go over this information in further detail, discuss your life insurance needs, and any other questions you may have, please feel free contact me by clicking on the button next to my picture and I will be happy to help. I do not charge any fees for my services and my group is licensed with over 50 insurance companies to compare rates through.
I hope the information is helpful - thanks very much for your question.
That is a great question! If you increased your mortgage, and there is a chance of leaving that debt behind, then it might be a really good idea to add a policy or increase your coverage to hedge against that risk. Knowing that your new mortgage is probably putting a dent into your available funds, I'd suggest that you look into a term life insurance policy in an amount that would cover the amount of the new mortgage cost. Term policies will be much cheaper than a whole life policy would be, and there is really no reason for the extra expense of the insurance once the mortgage is paid off. A term policy lasts for a specified period of time, and then ends, which makes it perfect for this kind of need. Look for a straight term, or decreasing term policy to cover the mortgage debt. I'd advise you to find a good independent agent in your area, maybe your homeowners or auto insurance people are a good place to start, if it will earn you discounts on those policies also. Any reputable life insurance agent can hook you up also. If you have any questions on term policies, please feel free to contact me, okay? I'm happy to help. Thank you for asking!
Insurance Representative, Transamerica Agency Network, Louisville KY
Anytime something major changes in your life it's a good idea to evaluate the amount of insurance coverage you need. With a mortgage I would recommend a term policy that covers the length of your mortgage. If your mortgage is 20 years purchase a 20 year gauranteed level term, or for a 30 year mortgage purchase a 30 year term. This is the most economical way to protect you and your family if a tragedy occurs. If soemthing happens your spouse has the funds to pay off the mortgage. If not your cost remains level while the mortgage is in force and goes away when the mortgage is paid off. To save money you may want to ask your insurance agent about layering the term policies to cover your mortgage.
CEO, RLI - Ruth Ladas Insurance, LLC, Fort Myers, Florida
Great question. Life insurance can be used for many reasons and there are many types of products available. Term insurance is the simplest form. You pay the premium and the company promises to pay out if the unexpected happens. That may work for you.
If you're comfortable and have an agent to work with, you may look at the larger picture and creating a plan that addresses more than the specific need to cover mortgage expenses. There are many opinions and options available on this subject!
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
The only reason to buy life insurance is when it is required by a contract (a mortgage doesn’t require you to buy life insurance) or you love someone. If you love someone and want them to continue to enjoy the home and income you provide, life insurance is the answer. If you are merely refinancing your mortgage, you probably have additional capacity to purchase life insurance from the savings on the mortgage payment. Spend a minute the next time you are with a widow and ask them about the importance of being able to stay in the home that they were living in when they lost their spouse. For most this is an enormous issue.
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
That is indeed a good question, and my answer would be, "probably". If you already have a Whole Life policy that is making money for you and increasing in benefit each year, this would be a time that I would recommend a separate Term policy to cover the mortgage. If you have a 25 year mortgage, and you have a WL policy already, you might want to implement a 20 year Term policy for the amount of the mortgage. That way in the event of your death the mortgage will be paid, and possibly more, and your family will still have the benefit from the WL policy to help them with their other needs.
The need for life insurance for most people increases with debt. The fact that your question states that you have a new mortgage suggests you now have a new debt. If you or your spouse or partner were to die and that income is lost, would it be a burden to the other loved one to cover this new debt? If the answer is yes, you need additional life insurance.
If you just closed on the new house you will soon receive or be bombarded is probably a better way to describe it, with letters about mortgage life insurance. These letters will look as if they are being sent by your mortgage company, but chances are they are not. Life insurance companies pay mortgage lenders for their lists and their logos to create leads to sell decreasing mortgage insurance. As you pay off your mortgage through the years, the face amount or benefit to your loved ones decreases, because you owe less to the bank.
If you purchase a guaranteed level term life insurance policy, then your loved ones get the difference not the insurance company. If you have a 30 year mortgage for $200,000, purchase a $200,000 30 year level term policy to cover that debt for your loved ones. When you pay off the mortgge drop the insurance coverage. Never leave a loved one holding excess debt when you die.
The debt to income ratio required to obtain a mortgage often necessitates two incomes in order to buy a home. If one of those wage earners were to pass away, it is nearly certain that the other will not be able to afford paying the mortgage on their own. Thus, in addition to adjusting to all the other difficult changes brought about by death of a parent and/or partner, survivors are forced to find and move to another home.
A low cost term life insurance policy with a face amount equal to the mortgage will pay off the mortgage and save survivors from much unneeded trauma.
Licensed Insurance Agent, HealthMarkets, Norwood, MA
This is a good question. Because you used the word "more", I am guessing you already have life insurance. Take a look at your coverage to determine if it would be enough to pay off the debt. If it is not, then a term policy would be a great option.
If this question came to mind because Mortgage Life Insurance was offered by the lender I would caution you to consider buying standard term life instead. Since mortgage life insurance is designated to pay off the loan it typically has a decreasing benefit that is in line with the pay off of the note. Another words your premiums stay the same but the pay out decreases as your debt decreases. The beneficiary is the mortgage company, so if the note is sold or you refinance you will have to rewrite the policy too. There are scenarios where mortgage life insurance is a good option. One that comes to mind is if someone has an underlying reason why they may be declined for life insurance. Mortgage life insurance can sometimes have less stringent medical screening.
Life insurance should always be designed around all your financial needs. That is why it is best to work with a licensed agent who will take the time to understand your particular situation and advise you of your options.
Insurance Advisor, Lordship Insurance Services, California
A mortgage is typically the single largest investment a family will make. Not only is it a large financial commitment but it provides for one of the basic human needs; housing.
As such this investment should be protected for the unexpected. Insurance is a great tool to do that. You can get what is called "mortgage protection" which basically can do a couple of things for the insured;
1) You can have it tied directly to the mortgage so that in the event of an untimely death the house is paid off.
2) You can have enough coverage to pay off the mortgage in the event of death with the benefits going directly to your beneficiary to use as they see fit.
3) You can get enough to allow your beneficiary to continue to make mortgage payments until they decide to either sell the home, refinance the home or make other arrangements.
Protecting your investments is always a wise decision.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
It may not be a good idea to get more life insurance after getting a new mortgage. You may have enough already.
Here’s how you could find out. Ask yourself the following:
Do I have enough coverage so that my spouse can pay off the mortgage if I pass away?
What if I take out a second mortgage? Do I have enough coverage for that as well?
What if I feel I have enough coverage for both the mortgage and my dependents - but then have another kid? Then I would need more of the benefit to replace my income, and so would have less to cover the bank debt.
How about any other family obligations? Are my parents financially secure? Any chance one or both would become dependent on me? If so, that would create a demand for more coverage.
Any business obligations? Is my partnership agreement funded? The services of my key people indemnified? Bank debt insured?
Estate preservation? Charitable gifts?
Can you see where I am headed with all these questions?
If you have completed a financial needs analysis, covering both current and future needs for life insurance, then you could be pretty sure whether or not you have enough coverage.
If you are like most other people, you don’t. You will probably end up buying another policy:)
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
It is always a good idea to review your coverages when you have a new life event occur. Did your mortgage increase your debt? If so, maybe an increase in coverage is in order. There will not be a single answer to this situation. You have to figure out what is important to you.
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If there is a surviving spouse, that person often has to make significant changes in their lifestyle choices as they would be losing an income stream to pay off those debts.
replaced - this can be everything from losing your house because the income is not there to pay the mortgage, to pay off the car loans, credit card debts (which can increase rapidly in this case as it's a quick source for people to delay paying immediate bills, but
draws substantially large interest rate charges and can put that person into even bigger debt).
So why use your own money to pay off your debt when you can use someone else's (the insurance company)? The idea is to pay pennies on the dollar instead of dollar for dollar by having a life insurance policy in place to cover the mortgage (a term life insurance policy would be sufficient since a mortgage is only designed to exist for 15 or 30 years (or other time frames depending on how your type of mortgage).
If you're looking to cover other debts or provide an income stream for your surviving spouse, then either a larger term life insurance policy is needed, different term lengths (e.g. part 20 year term insurance, part 30 year term insurance), or adding a portion in as permanent life insurance (Guaranteed Universal Life vs. Whole Life).
If you would like to go over this information in further detail, discuss your life insurance needs, and any other questions you may have, please feel free contact me by clicking on the button next to my picture and I will be happy to help. I do not charge any fees for my services and my group is licensed with over 50 insurance companies to compare rates through.
I hope the information is helpful - thanks very much for your question.
If you're comfortable and have an agent to work with, you may look at the larger picture and creating a plan that addresses more than the specific need to cover mortgage expenses. There are many opinions and options available on this subject!
If you just closed on the new house you will soon receive or be bombarded is probably a better way to describe it, with letters about mortgage life insurance. These letters will look as if they are being sent by your mortgage company, but chances are they are not. Life insurance companies pay mortgage lenders for their lists and their logos to create leads to sell decreasing mortgage insurance. As you pay off your mortgage through the years, the face amount or benefit to your loved ones decreases, because you owe less to the bank.
If you purchase a guaranteed level term life insurance policy, then your loved ones get the difference not the insurance company. If you have a 30 year mortgage for $200,000, purchase a $200,000 30 year level term policy to cover that debt for your loved ones. When you pay off the mortgge drop the insurance coverage. Never leave a loved one holding excess debt when you die.
A low cost term life insurance policy with a face amount equal to the mortgage will pay off the mortgage and save survivors from much unneeded trauma.
If this question came to mind because Mortgage Life Insurance was offered by the lender I would caution you to consider buying standard term life instead. Since mortgage life insurance is designated to pay off the loan it typically has a decreasing benefit that is in line with the pay off of the note. Another words your premiums stay the same but the pay out decreases as your debt decreases. The beneficiary is the mortgage company, so if the note is sold or you refinance you will have to rewrite the policy too. There are scenarios where mortgage life insurance is a good option. One that comes to mind is if someone has an underlying reason why they may be declined for life insurance. Mortgage life insurance can sometimes have less stringent medical screening.
Life insurance should always be designed around all your financial needs. That is why it is best to work with a licensed agent who will take the time to understand your particular situation and advise you of your options.
Good luck!
As such this investment should be protected for the unexpected. Insurance is a great tool to do that. You can get what is called "mortgage protection" which basically can do a couple of things for the insured;
1) You can have it tied directly to the mortgage so that in the event of an untimely death the house is paid off.
2) You can have enough coverage to pay off the mortgage in the event of death with the benefits going directly to your beneficiary to use as they see fit.
3) You can get enough to allow your beneficiary to continue to make mortgage payments until they decide to either sell the home, refinance the home or make other arrangements.
Protecting your investments is always a wise decision.
Here’s how you could find out. Ask yourself the following:
Do I have enough coverage so that my spouse can pay off the mortgage if I pass away?
What if I take out a second mortgage? Do I have enough coverage for that as well?
What if I feel I have enough coverage for both the mortgage and my dependents - but then have another kid? Then I would need more of the benefit to replace my income, and so would have less to cover the bank debt.
How about any other family obligations? Are my parents financially secure? Any chance one or both would become dependent on me? If so, that would create a demand for more coverage.
Any business obligations? Is my partnership agreement funded? The services of my key people indemnified? Bank debt insured?
Estate preservation? Charitable gifts?
Can you see where I am headed with all these questions?
If you have completed a financial needs analysis, covering both current and future needs for life insurance, then you could be pretty sure whether or not you have enough coverage.
If you are like most other people, you don’t. You will probably end up buying another policy:)
.