Home Insurance

Should I Buy Life Insurance to Pay off my Home?

A mortgage loan is a major expense.  Along with car loans, mortgages are quite often the largest expenses one can take on throughout their lifetime. It is crucial that an individual with any one of these financial obligations take responsibility for these commitments and not burden their family members with an expensive mortgage, loans, car payments and other costs. Previously you would be requirement to take out life insurance as a condition of the mortgage, in order to protect the lender in the event of the borrower’s death, however this is no longer the case.

So how does Life Insurance help?

It is a good idea to purchase a life insurance policy with enough benefit to at least cover the balance of any loans. An excellent rule of thumb is to add all outstanding debts or expenses to the mortgage loan to arrive at a reasonable amount for the face value of a life insurance policy.

The life insurance calculator assumes that the insured will have immediate family to support even after their death.  A financial adviser will help the policy holder to factor their mortgage into the equation when calculating an appropriate death benefit.  If the policy holder should pass away and does not have immediate family living in the home, they have the option of leaving it to a beneficiary or assume that it will be sold.  In either case, it is important to have enough life insurance to cover the mortgage payoff, in order for loved ones to take care of all other expenses and not worry about the largest one – the mortgage.  If the home is to be sold, they will be rushed into selling the property, often at a loss, because they cannot afford to pay the monthly mortgage payments while the house is on the market.

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