Life insurance has many applications towards providing benefits for families. The first is that Life Insurance can make certain that there are funds in place to ensure your family stays in your home if there is an untimely death. Life insurance provides a death benefit that is free from federal income tax. Yet your family can use the death benefit for any number of financial needs, including making the payments on your mortgage.
Life Insurance has other applications that can be beneficial to your mortgage as well. When using Permanent Life Insurance the cash value element that grows tax-deferred within the policy can be used in multiple ways. This account of cash value may be accessed through policy loans and withdrawals that can be used for a variety of living needs, such as paying off a mortgage early.
Here’s how:
Many insurance companies offer a number of loan provisions including variable and standard interest loans. There is a specific loan available with some companies that will allow the client to receive a guaranteed net zero cost loan, which is available after the policy has been in force for a certain amount of time. In some cases, this type of loan can be accessible as soon as five years into the policy’s life. The advantage is that the loan charges and credits the same amount of interest, zero. Meaning you pay a net zero percent interest rate and are under no obligation to repay the loan. If you do not pay the loan back, the amount of the loan is simply deducted from the death benefit of the policy. This benefit loan provision can easily be worked into a family’s over all Financial Plan, it is also one more way you can allow your life insurance to work for you while you are alive. Have questions? Contact Us
