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In assessing the need for life insurance one of the many considerations
is the status of any currently held real estate that is mortgaged.
A vision of exactly what would occur if the principal income
source that pays most or all of the mortgage payments were
to expire. It is prudent to consider that one can use a life
insurance policy that will provide for a number of payments
or that would pay off the mortgage(s) entirely as a policy
benefit purpose. Many people do not consider that to do otherwise
can mean losing the value of all previous payments if the
property goes into foreclosure because payments cannot be
maintained.
Careful thought should be given to the process
of events that would occur if the mortgage payment income
source were to end. It can be difficult to think in terms
of ones' demise, but it is required to accurately project
and prepare for the level of family support desired.
If a
family were to lose the primary income earner, two levels
of expense can arise without life insurance coverage. Day-to-day
living expenses would have to be met along with mortgage
payments (or rent payments should the home be lost). Both
of these are likely unacceptable results for most families
to consider. Without the family home, surviving can be twice
as difficult if income were to significantly drop or stop
altogether.
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| Matching a Life Insurance Policy to a Mortgage |
Planning to pay off a mortgage is a matter of matching the remaining years on a current mortgage with a term policy of approximately the same number of years. Thinking in these terms, if the mortgage is old it may be a good time to refinance to get a lower rate or lower payment as a way to obtain insurance with a cheaper premium. A good estate planner or estate planning attorney can perform these 'what if' calculations for you or you can estimate the scenarios yourself with a little knowledge of mortgage and life insurance payments and terms.
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| Forms of Real Estate Ownership Don't Protect in Many Loss Situations |
Various forms of real estate ownership can be considered,
such as joint tenancy. Joint tenancy is a way for two
or more people to hold title to a property with shared ownership. When
one of the owner's dies, the other owner(s) share equally
in the property. When there are two remaining owners
and one dies, ownership passes to the remaining owner completely.
This form of ownership considers only half the picture if
the remaining owner or owners do not have the income to support
mortgage payments in the event another owner should die. In
those situations, life insurance could be the right instrument to help guarantee that ownership
of real estate remains with the income earner's family.
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