Can You Buy Credit Life Insurance on a Home Mortgage at Any Age?
Credit life insurance is life insurance that offers a death benefit that decreases over time. This is sometimes referred to as decreasing-term life insurance. The life insurance policy is purchased on a mortgage you own.
Other People Are Reading
-
Function
-
Credit life insurance is term life insurance that protects your family in the event that you die prior to the mortgage being paid off. Credit life insurance offers a death benefit that decreases over time. As you pay off the mortgage, the death benefit decreases to reflect the current mortgage balance. Unlike private mortgage insurance, which pays the bank if you default on the mortgage, this loan pays your family.
Benefit
-
Credit life insurance leaves your family with the money necessary to pay down the mortgage debt you owe. This life insurance often carries lower premiums than ordinary term life insurance, since the death benefit decreases over time.
-
Limitation
-
Credit life insurance is generally purchased when you first start the mortgage, although you may technically purchase this type of policy at any time during your mortgage. If you refinance your home, the death benefit does not increase to reflect any new mortgage balance. This may be problematic if you do a cash-out refinance. in which you remove equity from your home. Additionally, many states place a limit on the age at which you may purchase term insurance. This is normally over age 84 or 85, though this depends on the state. This means your policy cannot extend beyond this maximum age. If an insurer does not offer a policy with a term shorter than 30 years, this would also mean that you wouldn't be able to get a policy after your mid-50s.
Considerations
-
Permanent life insurance will give you the life insurance protection you need if you expect to carry a mortgage into your old age. Many states limit the age you may purchase term life insurance. In general, life insurers will not insure you beyond age 80 or 85, depending on state laws. If you need insurance to cover a mortgage beyond this age, the permanent policy will stay in force until you die. Otherwise, you may want to consider a reverse mortgage. A reverse mortgage is a mortgage in which the original mortgage loan is paid off and a new mortgage is secured. The new mortgage allows you to cash out the equity in the home. The loan does not need to be repaid until the second spouse living in the home dies or moves out of the house. While a reverse mortgage does not eliminate the mortgage debt, it does provide some measure of relief from mortgage payments in your old age.
-
