First let’s assume a homeowner does adequate research including taking a long hard look at the disadvantages and alternatives decides a reverse mortgage appropriate for their situation. Granted, many homeowners will need every penny of this money, but some may desire to tap into home equity for discretionary funds and have broader goals. For example, those who want an heir to keep the house, life insurance is a means to pay off the reverse mortgage’s loan balance.
For those in average or better than average health, life insurance is readily available in one’s 60’s, 70’s, and even 80’s. For joint policies only one of a couple needs to be healthy to qualify; the other can be uninsurable.
There are two forms of life insurance: term and permanent. Term level premium ends in 10, 15 or 20 years, so in generally term is not suitable to cover a reverse mortgage’s lifetime commitment. For permanent there is whole life and universal life, which comes in many forms. The best product to cover a reverse mortgages is guaranteed universal life. It’s fixed rate and coverage for life, usually to age 121. All the policyholder has to do to is pay the premiums on time. Couples can get joint coverage, also known as second to die coverage, with a joint survivor guaranteed UL. How much does a guaranteed UL cost? There are sample rates by age on the right hand side for individuals. Please contact me for your own personalized quote. Here’s an example.
Mr. and Mrs. Jones, both 73 and in good health, needs funds for retirement but want to leave their lakeside home to their daughter, so they decide upon a reverse mortgage. They qualify for a lump sum payment of $250,000. They take out a $350,000 joint survivor life insurance policy so their daughter may pay back interest and principal on the loan, and also as a contingency against declining home value. A $350,000 joint survivor guaranteed UL with Prudential is $650.00 a month, at the preferred non tobacco rate.
If this couple were in average health, this Prudential joint coverage is $887.00 a month at the standard rate. To show you how joint policies compare to individual, using this example a $350,000 individual policy for a woman is $768.38 a month with Lincoln National and $1,009.23 a month for a 73 year old man with Banner Life.
Keep in mind the heirs can be the owners and beneficiaries of life insurance policy and pay a portion or all of the premiums.
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