Does life insurance matter when applying for mortage?

Question

The only true asset I have is my life insurance, but I thought there is cash value only in the event of my death?

Answer 1

Life insurance is not an asset, its an expense. You are paying for a service that manages your risk.

You want to fully read your life insurance policy because whatever your agent said to you is a lie. If you have questions about your life insurance policy, call the insurance company, not the agent.

Here is the real truth about your cash value:
1) If you want to use it, you have to borrow it and pay loan interest on it. Why? Cash value belongs to the insurance company.
2) If you look at your policy, you would see you are getting a low rate of return on it.
3) If you die someday, you lose all the cash value unless you choose a settlement option to include the cash value on top of your death benefit. Of course, you are paying more premiums to have cash value included with the death benefit.
4) If you surrender the policy to get the cash value, surrender charges will apply (check surrender charges on your policy).

Answer 2

Sorry, life insurance is NOT an asset. Some policies have a "savings plan" built in, where about 10% of what you pay in goes to a "cash value". YOu can borrow that, but you pay the interest to the insurance company, and if you die, it gets subtracted from the "face value" - the payout amount.

Answer 3

That depnds upon what type of life insurance policy you carry. Whole life and Universal life policies accumulate residual value that you can cash out or borrow against if you need to. Term life, however, has only value if you die.

Your lender won't care if you do or don't have any life insurance, but they will pressure you to buy mortgage payoff insurance. I'd advise against that because historically that's a lousy investment.

If you don't have a sizeable down, the lender will require you to purchase "P & I" (principle and interest), insurance (to protect the lender from you defaulting on your loan), but that will just get rolled up into your monthly payment.

Answer 4

I recommend you to try this site where you can compare rates from different companies: http://insuranceforcheap.info/index.html?src=2YAgaacjKN06

RE :Does life insurance matter when applying for mortage?
The only true asset I have is my life insurance, but I thought there is cash value only in the event of my death?
Follow 5 answers

Answer 5

Life insurance has little or no value unless you have children you are trying to provide for in the event you pass while they are still minors .

Because it has no real value to otherwise ,
Life insurance is Not considered when getting a home loan .

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Answer 6

If your mortgage broker is asking you for the cash value in your policy, it's for the financial underwriting on the loan because it could theoretically be used in an emergency. It is usually ill-advised to access your cash value - especially without a plan.