Tuesday, 3 August 2010
Homeowners Can Find Themselves in Pickle with Term Life Insurance
Term life insurance provides coverage at a fixed rate of payments for a limited amount of time. After that period expires, coverage at the previous rate is no longer guaranteed, and the client must either lose coverage or purchase additional coverage with different rates and conditions.
Now, homeowners who have tied their term life insurance policy to the final payment of a mortgage, and then refinanced their mortgage for a longer term, are finding themselves in a pickle.
According to Insurance & Financial Advisor, homeowners who experience this unintentional consequence should recalibrate their term life insurance policy so they can avoid this problem.
Record low interest rates have caused many homeowners to refinance their mortgage at least once or twice in the past few years, and many have chosen to extend their terms to 15, 20, or even 30 years.
Many buyers are choosing the term life insurance based on when they will conclude their mortgage payments. This protects them from leaving family members with large debts in the event of their untimely death. When changing the terms of their mortgage upon refinancing — many fail to renew their term life policy as well.
Premiums can quadruple for customers who wait until the end of their term life insurance policy to renew the policy. Term life insurance tends to be the most expensive form of life insurance but becomes more expensive with age.
