Without a doubt, the most common use of life insurance is to provide for our loved ones. Most often this translates to income replacement based on the life of the insured.
Common Uses of Income Replacement Insurance
Most life insurance shoppers want to provide for these common concerns:
- Standard of living. Life insurance can provide for the daily necessities of your loved ones and allow them to maintain their standard of living without the discomfort of adapting to a new home, school or limited financial means.
- Child care. Every parent, wage-earner or not, would do well to have life insurance coverage. An adequate death benefit enables the surviving parent to either stay home with the children or hire a caregiver.
- Higher education. Many want to provide for their children’s college expenses or send their spouse back to school in the event of their untimely death.
Term life insurance is usually recommended for these needs because of the lower cost associated with it; although other options may fit your individual needs better.
What is Mortgage Protection Insurance?
Mortgage protection insurance, also known as mortgage life insurance, is a type of life insurance designed to pay-off your mortgage and provide financial protection in the event of your death.
Is it the Same As Private Mortgage Insurance (PMI)?
No, Private Mortgage Insurance or PMI is used to protect your lender should you default on payments. With a mortgage protection insurance policy, the death benefit is used to pay off the remaining balance on your mortgage. Mortgage protection insurance instead protects your family and loved ones and allows them to keep your home in the event of your untimely death.
How long does Mortgage Protection Insurance Last?
Normally, mortgage protection insurance is purchased for a 30-year duration to match a typical mortgage term. However, depending on the time remaining in the mortgage and other needs, the term of the policy can be more or less than the term of the mortgage.
Who Should Purchase Mortgage Protection Insurance?
Mortgage protection insurance can be purchased with the sole purpose of paying off your mortgage, but many financial planners would suggest that you look at your financial situation as a whole and buy a life insurance policy that takes all of your finances into account.
Estate Protection with Life Insurance
Many of us own houses; some of us own businesses; a few own other sizeable assets. In most cases, we want our heirs to receive these assets intact and in entirety. Life insurance is one of the best tools available to accomplish estate protection. Normally, permanent life insurance is used in estate planning situations.
The Estate Tax Problem
Federal taxes alone can exceed 50% of an estates value. When an estate does not include enough liquid assets to pay the taxes due, assets must be sold. Thus, businesses, houses, etc. are removed from the estate, and the inheritance available to the heirs is considerably less than the estate’s actual worth.
How life insurance protects an estate
The obvious role that life insurance plays in estate protection is to provide enough funds to cover the estate taxes. But there’s more… one of the reasons that life insurance is so appealing is that proceeds from life insurance are generally exempt from taxes.
Neither Transamerica Financial Advisors, Inc. nor its Representatives may offer tax and/or legal advice. Please consult your tax and/or legal adviser for guidance on your particular situation.
As an independent company, we can explore many carriers for our clients dependent on their needs. Some of our preferred partners are listed below. If you would like for us to explore other carriers, please ask.