When a person dies, no one should have to worry about money

How do you help families stay out of debt? One way is to ensure there is enough money for them to continue living in their home in case one of the breadwinners passes away.

In 2010, I visited a couple who had sent a postcard saying they were interested in protecting their mortgage in case anything happened to one of them.

They each already had whole life insurance policies, the type that — as implied in their name — is supposed to cover people for their whole lives.

Defy the Myths That Kill Your Retirement
Are you 100 percent certain you’ll have a great retirement?medium.datadriveninvestor.com

However, whole lives are apparently not created equal.

Insurance agents are trained to look at policies to understand who is insured for how much and for how long. Those terms are spelled out in the first few pages of every policy.

The couple’s policies were eye-opening for me and for them. Clearly shown in the projections, if each of them continued to pay their premiums in full and on time, each policy would lapse — ending coverage — in just a handful of years.

Their whole life insurance would likely end well short of their whole lives, leaving them with nothing to draw from when one of them died.

This was the easiest sale I ever made.

Better Coverage

I replaced their soon-to-expire supposedly whole life policies with brand-new permanent coverage of $100,000 each at roughly the cost of their original plans. No extra money would come out of their pockets.

Cash would also build in each policy to increase its death benefit. As set up, the couple — then in their 50s — would be covered until age 100, which is the usual standard for whole life insurance.

We all parted happily that day.

Just over 11 years later, the husband died.

Despite the tragic circumstances, the couple had the wherewithal to remember the precious gifts they had in their hands.

Have a financial first-aid kit — and use it
Draw from money you’ve saved rather than borrow on creditmedium.datadriveninvestor.com

After the husband’s funeral, the wife contacted the life insurance company to ask about filing a claim. The company emailed her the forms to submit along with her bank account information and her husband’s death certificate.

A week after she mailed her claim information, the life insurance company made a direct deposit into her checking account of more than $114,000 — representing her husband’s basic coverage plus cash accumulation.

All things considered, the wife was relieved. She said already planned to sell their house and move near her family. The insurance proceeds would help her with the sale and close on her new home the next month.

This is how mortgage protection is supposed to operate. It’s good to know that the stuff we sell works.

About the Author

Jim Katzaman is a manager at Largo Financial Services and worked in public affairs for the Air Force and federal government. You can connect with him on Twitter, Facebook and LinkedIn.

Disclaimer

This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.