Bill and Rhonda always dreamed of owning their own home. After their second child was born, they decided it was time to seriously start looking. They searched around until they found the perfect house: white picket fence, yard, two-car garage, big picture window in the front, perfect to frame a Christmas tree, and a wrap-around porch. Bill and Rhonda found the house of their dreams. It was expensive and a bit out of their price range, but they decided to do whatever it would take to own it. They took out a thirty-year mortgage. A small price to pay, they thought. But then tragedy hit. While driving home from work one night, Bill was killed in an automobile accident. In addition to all the other expenses associated with Bill’s funeral, Rhonda realized that without her husband’s income, there would be no way she could afford the mortgage payments on their home. Shortly after Bill’s accident, Rhonda was forced to sell the house, and with it, what remained of her and her family’s dreams.

For many of us, our home is the focal point of our lives. It is the private sanctuary where we raise our family, seek refuge from the pressures of daily life, entertain friends and relax. It is our source of pride and joy. Our homes are where we spend the most precious moments of our lives, surrounded by our loved ones in warmth and comfort.

At first, you may think of your home as your family’s most valuable asset. But in essence, this is not true. The fact is, you are your family’s most valuable asset. In addition to your love, emotional support and guidance, you provide the income that pays for most or all of the costs associated with your family’s home ownership. But is your family equipped to cover the costs associated with owning your home when you’re gone?

Life is unpredictable, filled with risks and uncertainties. If you die prematurely, the greatest financial challenge facing your family would be finding a way to replace your income. Without proper planning, many families are forced to dip into education funds, or other investments set aside for established needs in order to cover the high costs of owning a home: mortgage payments, taxes, furnishing and maintenance. Fortunately, there are ways you can help your family remain in the home you worked so hard to provide for them.

Using life insurance as a mortgage protection strategy is an uncomplicated and powerful way to help you and your family gain peace of mind and financial protection for the future.

The Strategy

The premise is simple: you purchase an appropriate permanent life insurance policy with a death benefit sufficient to pay off your mortgage if you die. In the event of your death, your policy would provide a sum of money, income tax free, which can:

  • Be used to help replace the income your family would lose, allowing them to cover the costs of keeping and maintaining your home, or
  • Be put toward paying off the mortgage, thereby relieving your loved ones of an immediate and intimidating financial concern.

Additional Benefits

By making whole life insurance a component of your asset protection program, you could build cash value within the policy which can actually be useful during your lifetime. For example, you could use this cash value as a source of emergency funds to pay for a wide range of unexpected expenses. However, it is important to know that withdrawals are reported as income and are subject to ordinary income tax treatment (as opposed to capital gain or dividend income), and if made prior to age 59, may be subject to an additional 10% federal income tax penalty.

None of us enjoy confronting the inevitable. But in order to make certain that the people we love most are provided for, it is important to make preparations before it’s too late.

You have provided your family with a home, a place that has afforded them security, a place that has housed their hopes and dreams.But have you protected these dreams by insuring the life of their most valuable asset? By using a life insurance policy as part of a mortgage protection strategy, you can take the steps now to help protect what you’ve worked so hard to attain.