Using Life Insurance to Protect Your Mortgage

Life insurance is often used as a tool to safeguard your family’s future after something unexpected happens to you. While its primary purpose is to provide financial security to your loved ones, it also plays a role in mitigating various financial risks like your mortgage payments. 

Having a life insurance policy can prevent your loved ones from losing your home if you pass away. Here is how. 

How Does Life Insurance Protect Your Mortgage?

Your home is a large financial investment and often seen as a safety net for your family and loved ones. It offers stability and security but often requires a mortgage loan to cover the costs. If you pass away unexpectedly, your loved ones may struggle to afford the mortgage payments without your income. But having a life insurance policy can help ensure your family can continue to live in your home without the added financial stress if something happens to you. 

With a life insurance policy, you can protect your mortgage and ensure your loved ones have a secure place to live after you pass away. 

Designating beneficiaries on your policy will determine who the death benefit falls to, meaning the payout from your insurance company after you’re gone. This sum of money can be used by your beneficiaries to pay off your mortgage or other debts you may leave behind.  

Types of Life Insurance That Can Protect Your Mortgage

Different types of insurance can offer you different benefits. Here are two different types of life insurance that can protect your family and your home. 

1. Term Life Insurance

With a term life insurance policy, you pay fixed premiums for the length of your term. This could be for 10 years, or it could be for 30 years. After the predetermined period is over, your coverage ends unless you choose to convert to a more permanent form of life insurance. 

Term life insurance usually offers a lower premium compared to other life insurance options. You can customize the coverage amount so you can be sure any debts are covered and your family is cared for. 

1. Whole Life Insurance

Whole life insurance, also known as permanent life insurance, is designed to be kept for a lifetime as long as the premium payments are current. With a whole life policy, you have coverage for life. That means that no matter how long you live, your family will receive a payout they can use for things like repaying your mortgage loan. 

How Much Life Insurance Do I Need?

When determining what type of life insurance policy you need and how much coverage you should have, it’s important to analyze who may be impacted if you were to pass away. If you have children or other dependents in your home, you may have financial responsibility for those that rely on your income. 

It’s also possible that your family will be left with several years of mortgage payments. If you know you will leave a mortgage loan to your loved ones if you pass away, you may want to consider a policy that has enough coverage to pay off your mortgage in full or acquire a term life insurance policy that could provide monthly income. However, it’s important that the monthly proceeds of the term policy are enough to cover a monthly mortgage payment. 

To determine the right amount of coverage for you, consider your debt, household expenses and financial goals (such as college or retirement). And remember, it’s always okay to ask a professional for help!

Protect Your Home and Your Family

Life insurance can safeguard more than just your home. Our life insurance calculator can also help you decide how much coverage you may need. Meet with your local Farm Bureau agent today to ensure your family is protected if the unexpected happens.