What Is A Mortgage Life Insurance Policy And How Does It Work?

What Is A Mortgage Life Insurance Policy And How Does It Work

How Important Is Mortgage Life Insurance

Mortgage insurance is intended to pay mortgage payments in the event a homeowner is unable to make the monthly mortgage payments. In most cases, people who have had to use the insurance consider mortgage insurance a “peace of mind.” It could mean not losing your house and other financial tribulations.

Mortgage insurance is oftentimes referred to as being covered under a decreasing term insurance, mortgage protection life insurance, or mortgage life insurance. Also, mortgage protection life insurance ensures that your mortgage balance will be repaid if you died during the policy term. Therefore, having mortgage life insurance can be very important to you and your family.

The Benefit Of Mortgage Life Insurance

Simply put, if you die, the balance owed on your mortgage loan is paid off and your family will receive a debt free home. When considering purchasing mortgage life insurance, you should ask yourself if your family could afford to live in your home if your income was no longer available. This question becomes real important when considering this option to a mortgage.

The amount of mortgage life insurance you purchase is equal to the amount of your mortgage. As you make your monthly mortgage payments, the amount of the mortgage life insurance protection decreases as well. This is also known as decreasing term insurance. If the insured dies during the term or this policy, then the mortgage will be paid off.

In short, mortgage life insurance guarantees that the mortgage is taken care of in the event of death. It is often less expensive to purchase and the benefits to your family will outweigh the costs associated with the amount of premiums. The type of mortgage life insurance coverage that you require will depend on what type of mortgage you secure and repayment or interest only plan.

What Is A Survivorship Life Insurance Policy?

What Is A Survivorship Life Insurance Policy

Thinking About A Survivorship Life Insurance Policy

A survivorship life insurance policy is sometimes called a second-to-die or a survivor insurance policy. It is basically one policy that insures two people and is usually spouses. This means, then the first spouse dies, there are no monies/benefits paid out. The life insurance policy remains in effect and premiums are still paid. The death benefit is not paid out to the beneficiary until the death of the second insured covered under the life insurance policy.

Survivorship Life Insurance is also a type of permanent life insurance protection. It can be purchased as a whole life policy or a variable life insurance policy.

Some Uses Of Survivorship Life Insurance

This type of life insurance is used to ensure that the loved ones are provided for after the death of both spouses who are covered under the policy. If both spouses die, the survivorship life insurance policy will be helpful for families who have children that need to be cared for.

Also, the suvivorship life insurance policy benefit can be used to pay or help pay for estate taxes. In this case, the monies for inheritance are not spent trying to cover the expense of estate of income taxes.

This type of life insurance policy can also be a good decision for those couples where one spouse is not in good health and all other insurance types are too expensive to purchase for coverage. The insurance company may be a bit more forgiving since the policy is covered with two individuals and the other spouse is in relatively good health standing. This will be beneficial to the spouse who may not be in a good of health as the other, which in turn will “balance out” the risk to the insurance company who will be insuring these individuals.

Cheat Sheet To Selecting A Company To Buy Life Insurance Online

Cheat Sheet To Selecting A Company To Buy Life Insurance Online

Buying life insurance can seem like an overwhelming task if you don’t know exactly what you need. Many agents are trained to give you a standard plan, and you can leave the website, after final purchase feeling like there are still some unresolved issues left behind.

But, if you go into the process of buying insurance knowing exactly what it offers, and where each feature would fit into your life, you will find that you will leave the website, after final purchase feeling like you’ve covered all your bases, and that your family will have the protection it needs, should the need for coverage arise.

How To Know What You Will Need

The insurance that you’re going to need is determined by the lifestyle that you’re leading, and the amount of money your family will need to survive, pay off debts, and feed and clothe all dependents. Most agents suggest that your insurance equal 5 to 10 times your yearly salary.

Your Checklist for Insurance

  1. Your insurance policy should provide your loved ones with the finances to pay living expenses, your mortgages, provide extra cash on hand for several years, and funeral expenses.
  2. Your policy should provide tax free cash for any business and personal expenses like debt and unpaid bills etc,, funeral and estate fees, when the policy is cashed in.
  3. The policy should have a savings component or a pension that can be cashed in during retirement.
  4. A critical illness rider is an excellent idea for dependents and spouses. Make sure you understand the terms of your rider clearly before you sign off on it though.
  5. Term and Standard life insurance both have unique benefits. With term you can get money back during scheduled points in your life. If you are younger, you might want to consider term life insurance.

What Is A Second To Die Life Insurance Policy?

What Does Second-To-Die Life Insurance Mean To You

First, let’s define Second-to-Die Life Insurance. It is used to decrease the overall cost of a life insurance policy and/or offer funds to cover things such as estate taxes when they are due, typically at the death of the second spouse. These life insurance policies are also frequently used in conjunction with other financial means such as a trust account set up to replace a gifted asset for heirs.

The life insurance policy premiums can be paid using a portion of the income generated from a trust. There can be many other purposes for second-to-die life insurance; from covering taxes to setting aside monies for charitable purposes after death. The difference between these policies and other types of policies it that these second-to-die policies will cover two people rather that just one. Typically, a husband and wife will the individuals who purchase this type of insurance coverage.

The life insurance policy will not pay out until both parties have passed away. This type of insurance can be helpful if one spouse has health issues that prevent them from obtaining life insurance coverage any other way. And, since two lives are insured rather than the one life policy, the cost of premiums can be considerably lower. This coverage is generally only beneficial to couples who expect to leave a large estate behind and there is generally a minimum amount of coverage that can be purchased.

Uncovering Benefits of Second-To-Die Life Insurance

Besides benefiting from the possibility of lower policy premiums, there are several other benefits from purchasing second-to-die life insurance. Qualifying for these types of policies are relatively easy. One reason for this is that the risks that are associated with insuring two individuals are regarded to be a great deal lower than simply insuring one person.

Before selecting coverage of this nature, a client would be wise to receive counseling from both an estate planner and an insurance agent.

How Should A Life Insurance Beneficiary Be Named If A Minor?

Dangers Of Leaving Life Insurance Money To A Minor Child

It’s illegal for a minor to be given a large sum of money from a life insurance policy. Most companies allow you to list them, but never bother to tell you that the money will not actually reach the child until they turn 18. If a minor is named on a life insurance policy and the policyholder dies, probate courts will hold a hearing to name a guardian who will watch over the money until the child is old enough to inherit the money. In many cases, probate courts choose an area bank to manage the money until the child’s 18th birthday.

Making Sure Your Wishes Are Met

If you want your child to benefit from your life insurance money, it’s always best to set up a trust for your minor child or children. Talk to a lawyer to have this performed legally. You also have the option of designating how the child will use the money when it is inherited. If you wanted that money to used specifically for college tuition, you can set it up with the estate’s trustee to have this happen.

It’s also possible to set up the distribution of the life insurance funds so that the child receives a portion of it at his 18th birthday, at the 21st birthday and then at the 25th birthday or however you choose. A trust fund is the best way to ensure the money you leave your child is handled properly until your child is the legal age to receive the inheritance. Plus, by setting up a trust fund, you can arrange it so that the money sits in a high-interest account building even more value over time.

Legally Set Up A Guardian

You can also set up a guardian who will watch after your minor child’s best interests. In most states, the guardian must be 21 years of age or older. You can have a lawyer draw up the proper paperwork or ask your state government if a Uniform Transfers to Minors Act exists in your state and find out how to name a custodian to act on your minor’s behalf.

The danger to setting up a guardianship is that the guardian will have control of the money until your child is of the legal age. There is a risk for theft or misuse of funds. If the guardian is genuine, there is still the chance that money will be lost by poor investment decisions made by the guardian you select. Make sure you truly trust the guardian you select and that they share your investment ideals.