Common Questions
What is Mortgage Protection Insurance? Didn't I get that when I bought the house?
Mortgage Protection Insurance is not Mortgage Insurance. Mortgage Protection Insurance is life insurance for protecting you and your family. Mortgage Insurance is lenders' insurance; it protects them from homebuyers who default on payments. Some have to get it to qualify for a home loan. Mortgage Protection is typically a term life insurance policy designed to cover the cost of house payments in case the home's main income earner dies. If you die and the family can't pay the bills, they lose the house. Mortgage Protection Insurance solves that. It protects your interest. It safeguards your surviving loved ones from the financial effects of your death. So if you bought a $400,000 home, you would buy a Mortgage Protection Insurance plan that covers that amount, or a portion of it, to ensure that your loved ones have a place to live, and possibly cover other expenses, should you die unexpectedly.
Why get life insurance now? Can't it wait?
Most people get it. Some don't. It's an added expense. Like all things we buy, some have more value than others. A wedding ring means more than a sofa. Why? Because of the love and commitment it signifies. Likewise, a life insurance policy expresses the enduring love and commitment we have for those we cherish and want to protect. We might manage our affairs well, but death escapes our control. The healthiest lifestyles can't prevent tragedy. Life insurance mitigates the financial hardship your death could cause your loved ones. Sure, you can keep waiting to get it. That's a high risk gamble. Some have taken it and lost at great cost to their family. Most of us know someone who suffered that. There's a good reason you're thinking about it now. The prompter the action, the wiser. Keep in mind, it gets more expensive the older you get.
How much does a life insurance policy cost?
Many people overestimate the price of a policy. Per Nerd Wallet, the average cost of life insurance is $26/month, based on the the most common policy sold. Costs vary mainly based on age, gender and health. So a good way to consider what suits your budget and coverage needs is to stay within 5% of your monthly household income. For example, a life insurance budget for a household with a monthly income of $4,000 would be $200/month. You might increase or decrease that amount depending on your financial goals or budget constraints. So if you're looking at an IUL, you might consider investing more to protect your family and grow your money faster. If you're just looking to cover final expenses, you might invest less.
What is an IUL?
An IUL stands for Indexed Universal Life. Very simply, it's a life insurance policy that grows in cash value in relation to your premium payments and the performance of invested premiums in a given market index. It pays the death benefit to your beneficiary when you pass away (minus outstanding policy loans) but offers different advantages from a term life or traditional whole life policy. It offers a flexible face amount, flexible premiums and a cash-surrender value. Its unique feature is the way some of the premium is invested to grow the cash value of the policy based on increases in a selected external market index. It allows you to protect your loved ones, take advantage of a market index to grow your money, all without risk of losing value to market downturns, due to policy safeguards. Generally, given the overall trend of market indexes, your money constantly grows. In the event of a market crash, the cash value of your policy is unaffected. Effectively speaking, this plan protects your family, while growing your investment without risk of loss.