The Risks for Property Owners Without Life Insurance
Friday, April 17, 2015
Life insurance is a financial safety net for your loved ones in the event of your death. In many cases, not having life insurance is placing your surviving family members at great risk. For example, let’s look at the risks associated with owning a home and not having life insurance:
- Many lenders will not approve mortgage loans if the borrower does not have some means of paying off the loan in event of death. If you don’t have substantial investments or savings or life insurance, you may find you are unable to get a mortgage loan to buy your dream home.
- Most people with mortgages find their payment to be their biggest monthly expense. Those homeowners count on their current income to make those payments. If the primary income-earner passes away without life insurance, it would be very difficult, maybe even impossible, for the surviving family members to make the payments. They would have to leave their home. A life insurance policy can pay off the loan and enable the family to stay there for many years.
- Even if one partner is working and able to make the mortgage payments so your family can keep their home, that financial burden means that your family will suffer in other areas. There will be less money for basic necessities such as food, clothing and tuition. They may have to sell the home and find other accommodations to reduce their expenses.
- Some homeowners increase the size of their mortgage after a few years to do renovations on the property. If the lender cannot be sure that a later sale of the home would cover the increase in the loan, life insurance may be required to cover the difference between the loan amount and the sales value. If the owner dies without life insurance, and the house sells for a lower amount than what is needed to cover the loan, the remainder owing will need to come from the estate leaving less for surviving family members.
- If for some reason, your estate takes a long time to clear after your death, your family will need to make loan payments for a year or two, which may not be possible and could result in the loss of their home.
Becoming a homeowner is an important milestone for many, but it also places enormous financial responsibility on the family. Purchasing a home without having life insurance is putting everything you care about at risk. Protect your loved ones by discussing your life insurance options with an insurance agent today.
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Editor’s Note: This article was originally published on June 12, 2014 and has been updated for relevancy and accuracy.