Dying Before Your Mortgage Is Paid Off
The word mortgage is rooted in the 1400s. It comes from the combination of two words - the Latin word mortuus, which means death; and, the Old French word gage, which means pledge.
In other words: the literal meaning of mortgage is a pledge to repay even after we've died.
It's part of the contract. In exchange for lending you money, your lender expects payments each month until your contract is fulfilled - usually in 30 years.
But, should you die within that time period, your contact doesn't die with you. Payments are still due each month because your loan still has a balance.
This possibility of death is why every homeowner with a mortgage should also have a policy for life insurance.
Life insurance policies pay cash when the policy-holder dies. The cash payment can pay off the deceased’s mortgage loan, and retire the debt.
When you die and don't have life insurance, the loved ones you leave behind have a choice: find a way to keep making payments or sell the house.
At a minimum, your life insurance coverage should be large enough to retire all of your debts including your mortgage, student loans, and credit cards; plus the cost of a funeral service.
This is the minimum recommended coverage. You can – and might want to! – add to the size of your life insurance policy for extra cash payouts.
In general, a healthy home buyer in their 20s and 30s can purchase $1,000,000 worth of life insurance for $35 per month. That’s usually more than enough to pay off a house and debt; and provide security to a family.
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