Life Insurance & Your Mortgage
It is 'Strongly Recommended' that you take out life insurance to cover the amount of your
mortgage. If you die before the end of the
mortgage term your loved ones will be free of the
mortgage debt.
Life insurance provides cash to your family after your death. This cash (known as the death
benefit) replaces your income and can help your family meet many important financial needs
like daily living expenses, mortgage payments and college savings.
As the years go by, you may feel your need for life insurance has passed. But just because
the children are through college and the mortgage
is paid off doesn't necessarily mean that
your pension and savings will take care of whatever lies ahead.
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If you died today
your spouse will still be faced with daily living expenses. What if your spouse out-lives you
by 10, or even 30 years, which is certainly possible today? Would your financial plan,
without life insurance, enable your spouse to maintain the lifestyle you worked so hard to
achieve? And would you be able to pass on something to your children or grandchildren?
What Types Of Life Insurance Are There?
There are many kinds of life insurance but they generally fall into two categories:
term insurance and permanent insurance.
- Term insurance is designed to meet temporary needs. It provides protection for a specific
period of time (the "term") and generally pays a benefit only if you die during the term.
This type of insurance often makes sense when you have a need for coverage that will
disappear at a specific point in time. For instance, you may decide that you only need
coverage until your children graduate from college or a particular debt is paid off,
such as your mortgage.
- Permanent insurance, by contrast, provides lifelong protection. As long as you pay the
premiums, and no loans, withdrawals or surrenders are taken, the full face amount will be
paid. Because it is designed to last a lifetime, permanent life insurance accumulates cash
value and is priced for you to keep over a long period of time.
It's impossible to say which type of life insurance is better because the kind of coverage
that's right for you depends on your unique circumstances and financial goals.
Do You Have Homeowner Insurance?
There are two types of homeowner
insurance policies:
- Buildings insurance protects you against damage to the structure of your home together
with its fixtures and fittings
- Home contents insurance protects you against damage or loss of the possessions that you
would normally take with you if you moved
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