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 Lisa Austin, is a Financial
Services Associate with The
Prudential Insurance Company
of America’s Penn Agency
located in Pittsburgh, PA.
Lisa Austin can be reached at
lisa.austin@prudential.com and
at 412-247-8070 ext. 7439.
Protecting the house
your family calls home
Buying a home is probably one of the biggest financial obligations
you will ever assume. If something unexpected happens to you, your
loved ones will most likely inherit your home. Unfortunately, your
mortgage may not die when you do; it may be inherited too. To help
ensure that your loved ones won’t be left with this financial burden,
consider life insurance.
With the generally income tax-free death benefit from a life
insurance policy, your loved ones can help pay off debts, such as a
mortgage. Both term and permanent life insurance will help provide
this valuable death benefit, giving you and your family greater peace of
mind.
Term Insurance
A term life policy provides affordable temporary insurance protection
to cover your insurance needs during a specific time period. Common
coverage periods are 10, 15, 20 or 30 years, which can easily correlate
with your mortgage duration. As your mortgage balance decreases each
year, the face amount of the term policy remains level, which means
you have a guaranteed death benefit above and beyond your decreasing
mortgage balance. Your family can use those “extra” funds for other
important family needs, including paying last expenses or other debts.
Some term policies also offer an option to convert to permanent
life insurance and provide a credit toward your first year’s premium if
you convert within a certain period of time.
A new twist on term insurance is a life insurance policy that pays
you back for living. These return of premium policies typically have a
guaranteed death benefit for your beneficiaries for a specific period of
time, usually 15, 20 or 30 years, and/or a guaranteed return of out-ofpocket
policy payments (premiums) for you if you outlive the level
premium period. The amount of returned premiums may be reduced if
you take a loan on the policy and do not pay it back, if any premiums
are waived, or if you cancel the policy before the end of the level
premium period. This type of term insurance, which usually is more
expensive than other types of term insurance products, may reduce the
risk of spending money on something you may never use, and provides
an additional choice suitable for some individuals’ temporary insurance
needs. Availability and the terms and conditions of this type of product
may vary by carrier. This product may not be suitable for everyone.
Permanent Insurance
While premiums for permanent policies are often initially higher than
those for most term policies, permanent insurance policies provide
valuable protection you can’t outlive and have the potential to build
income tax-deferred cash value.
While the main purpose of any life insurance policy is to provide
a death benefit, a permanent policy may provide potential cash value
you can access through loans or withdrawals for a variety of reasons,
including paying your mortgage off early. This could potentially save
you thousands of dollars in interest. Of course, taking loans and
withdrawals from your policy will decrease its cash value and death
benefit, may affect any guarantee against lapse, and may have tax
consequences. There may also be additional financial or tax
consequences if you pay off your mortgage early. You should consult
with your tax or legal advisor concerning your particular circumstances
and never purchase a life insurance policy solely for this potential
purpose.
Whether you decide to purchase a term insurance policy to help
meet your temporary needs or to help secure protection for a lifetime
with a permanent policy, you can have greater peace of mind knowing
you are helping to protect your family’s financial security both now
and in the future.
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