The Benefits of Life Insurance When Buying a New Home
A perfect time to revisit your life insurance needs is when you are buying a home. Most new home owners take out a mortgage. Life insurance can insure that the mortgage can be paid allowing the family to continue to live in the home they saved for and worked hard to keep. A home is probably the largest asset that you have and the prospect of losing your home because of the death of a borrower can be financially devastating.
How does life insurance allow family members to keep their home if a wage earner dies? Let’s assume Tom and Mary buy their new home for $250,000 and take a 30 year mortgage for $200,000. Both are wage earners and are dependent upon each other to make mortgage payments. Both Tom and Mary should consider purchasing 30 year level term policies with face amounts of $200,000 and name each other the beneficiaries of the policies. Level term policies have a guaranteed level premium for 30 years and the death benefit remains level. Homeowners with single wage earners should consider life insurance on the wage earner if a mortgage exists to insure the family can continue to live in their home.
What are some benefits of the life insurance policy in regards to a new home purchase?
- The life insurance proceeds are paid income-tax-free to the beneficiary,
- The death benefit is paid directly to the named beneficiary avoiding probate and often within a few weeks after a claim is submitted,
- The death benefit of the policy remains level for the length of the term period insuring the mortgage can be paid off by the beneficiary,
- The beneficiary can choose to use the insurance proceeds to pay off the mortgage or invest the proceeds and continue to make mortgage payments.
Life insurance can provide the financial security to your family that will allow them to remain in their home with the mortgage paid off. Remember the peace of mind that your family will have if they can remain in their home is a huge weight off their shoulders. They may also be able to maintain their current lifestyle even if they lose of a loved one.
About the author: Ken Buccico holds a LUTC designation and has been in the life insurance business for 39 years. His wealth of experience empowers clients to make best possible decision regarding a life insurance policy. To explore the best life insurance option, contact Ken at 1-800-651-1953 or KBuccico@Pivot.com.