Mortgage Life Insurance

Mortgage Redemption And Cancellation

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Here is another approach to mortgage life insurance. You want to cover your mortgage in case you should die before your children are self sufficient. You also want to protect your spouse as your income is important to your lifestyle. As your home is one of your largest investments, probably the largest, you decide that mortgage life insurance is a good idea. We have already discussed using decreasing term insurance as well as using a level term policy. Let us now examine whether a permanent type policy could be intelligently used to protect your mortgage. Let us find out if there is any advantage to this.

• Mortgage Redemption And Cancellation Insurance

  Here is how this works. You can decide for yourself if this would work for you. When you buy your home you buy a whole life, variable universal life or variable life insurance in the amount of mortgage owed to the bank or mortgage company. The first thing you will observe is that you will be putting out a lot more cash than you would with your mortgage term life insurance policies.

  These permanent life insurance policies build cash values. The whole life policy has a cash value and earns dividends if the company performs well. The variable universal life policy as well as the variable life policy both have investments attached to them. You determine how much is applied to investment. These policies are sold only by prospectus as your investments are through mutual funds or through investments in stocks. The agent must have an N.A.S.D License in order to discuss this with you, let alone sell it to you.

  As the years go by all of these policies build cash values. At some point your cash in the policies will equal the amount owed on your mortgage. What you do is to use the cash to pay off your mortgage. You will have a home free of any encumbrances long before the end of the mortgage period. This, of course, is assuming your investments performed well. Keep in mind that only the base cash value of the policy is guaranteed. The dividends of the whole life policies are not guaranteed, neither is the investment performance of your mutual fund or return on your stock investment guaranteed.

  In a nutshell these types of mortgage life insurance policies protect your family in the event of premature death but they do even more. They afford you the opportunity to pay off your mortgage early. In essence you redeem your mortgage at an earlier date.