Life Insurance Can Protect Your Home

What would happen if you-the primary income producer or even as half of a aual-income partnership-suddenly died? Besides the emotional trauma, a surviving spouse may experience a significant decrease in household income that coiud lead to foreclosure. That's why many banks and mortgage companies encourage homeowners to purchase mortgage life insurance.

* With personally owned life insurance, you have more choices and control because your surviving spouse (assuming he/ she is the beneficiary)-not the lender-receives the insurance proceeds at your death. Your spouse decides what to do with the money. He/she can pay the mortgage in one lump sum or continue paying it down periodically. Plus, personally owned life insurance is portable, which means if you move in a few years, you won't have to replace your insurance, which could be a costly process. Furthermore, even after the mortgage is paid, personally owned life insurance can provide other valuable benefits. FULL TEXT

Money Matters

You and your family have worked hard to acquire your home, a rental property or other real estate holdings and you qualified for that mortgage thanks to your income level, excellent credit rating and financial history.

But, what would happen if you-the primary income producer or even as half of a aual-income partnership-suddenly died? Besides the emotional trauma, a surviving spouse may experience a significant decrease in household income that coiud lead to foreclosure. That's why many banks and mortgage companies encourage homeowners to purchase mortgage life insurance.

Life insurance from a lender vs. an insurance companyBasically, you purchase mortgage life insurance so that in tne event of an untimely death, funds are available to meet any outstanding mortgage balance. But, the type of insurance you purchase can greatly affect your surviving family members' options.

When you purchase insurance from a bank or mortgage company, you generally lose all ownership control. In many cases, you pay the premiums, the lender receives the proceeds at the insured's death and your family receives the deed to the house. While this may seem like an equitable solution, the spouse may not want to remain in the home due to several factors:

* The daily memories may be too difficult to handle.

* The expenses may be too large to maintain.

* Your spouse needs to live closer to friends and family.

* Your spouse needs to relocate for a Better job or school area.

* With personally owned life insurance, you have more choices and control because your surviving spouse (assuming he/ she is the beneficiary)-not the lender-receives the insurance proceeds at your death. Your spouse decides what to do with the money. He/she can pay the mortgage in one lump sum or continue paying it down periodically. Plus, personally owned life insurance is portable, which means if you move in a few years, you won't have to replace your insurance, which could be a costly process. Furthermore, even after the mortgage is paid, personally owned life insurance can provide other valuable benefits.

Term vs. permanent life insurance- Term insurance lets you purchase insurance protection for limited periods of time at a competitive priceusually in one-year, five-year, 10 or 20 year intervals- and provides a guaranteed death benefit as long as premiums are paid, when due. In some cases, term insurance is convertible to permanent life insurance, without showing proof of insurability.

Permanent insurance plans, such as Whole Life, are pricier than term products, but give you the benefit of building cash value. Aportion of the premiums you pay for permanent insurance coverage builds taxdeferred cash value each year. With Whole life, you are insured for your entire life, provided you pay all the premiums, which remain at a fixed premium schedule. While you may initially purchase Whole life insurance as a mortgage protector, you can access the cash value accumulation via loans for other means, like college funding.

Loans against your policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest. Permanent life insurance also allows you to customize a plan by adding optional riders. And there is a guaranteed death benefit, generally free from federal income tax.