The main reason would be to have that mortgage paid off if you died so your spouse doesn’t have to worry about paying off the debt. Creditors may come after your estate to recoup their mortgage loan to you which can create a very hectic situation for those involved that are handling your estate’s affairs.
If there is a surviving spouse, that person often has to make significant changes in their lifestyle choices as they would be losing an income stream to pay off those debts.
replaced – this can be everything from losing your house because the income is not there to pay the mortgage, to pay off the car loans, credit card debts (which can increase rapidly in this case as it’s a quick source for people to delay paying immediate bills, but
draws substantially large interest rate charges and can put that person into even bigger debt).
So why use your own money to pay off your debt when you can use someone else’s (the insurance company)? The idea is to pay pennies on the dollar instead of dollar for dollar by having a life insurance policy in place to cover the mortgage (a term life insurance policy would be sufficient since a mortgage is only designed to exist for 15 or 30 years (or other time frames depending on how your type of mortgage).
If you’re looking to cover other debts or provide an income stream for your surviving spouse, then either a larger term life insurance policy is needed, different term lengths (e.g. part 20 year term insurance, part 30 year term insurance), or adding a portion in as permanent life insurance (Guaranteed Universal Life vs. Whole Life).
If you would like to go over this information in further detail, discuss your life insurance needs, and any other questions you may have, please feel free contact me by clicking on the button next to my picture and I will be happy to help. I do not charge any fees for my services and my group is licensed with over 50 insurance companies to compare rates through.
I hope the information is helpful – thanks very much for your question.