Leigh Insurance Agency of St Augustine Blog
Do you seek a loan but are concerned about the lack of collateral? You should consider a potential source you may not have considered, your life insurance. A life insurance policy should be used as collateral to secure the loan through the collateral assignment. If you die while a policy is active, yet you still make payments on the mortgage, the death benefit is used to pay off the balance.
Here's what you need to know:
How Does It Work?
Lenders cannot guarantee that you can reimburse a loan they authorize. Since your credit record is a great predictor, lenders may require extra security. Unfortunately, many with the best credit histories might pass away unexpectedly. Attempting to apply for life insurance as collateral provides lenders with another opportunity to protect their interests while also making it easier for debtors to get approved.
A policy that lasts a specific length of time and pays out if someone dies while the insurance is valid to cover your creditor if you die before paying off your loan. Term plans that continue at least for as long as the borrowing term are often accepted as collateral by lenders.
A constant policy covers you for the rest of your life and accumulates long-term monetary value. Suppose you discontinue paying the mortgage as the security assignee of life insurance. The lender may take a portion of the death benefit to satisfy your debt or take the policy's cumulative cash value.
Why Do Individuals Get Life Insurance Collateral Assignment?
Regardless of whether you consider them a collateral assignee on your life insurance, institutions and lending businesses should do everything to recover their money. Like a credit requirement, some lenders ask you to put up a collateral assignment of the life insurance policy.
Whenever a creditor asks for a collateral assignment contract, it implies they believe you may not have enough resources in your property to meet the payments of your existing conventional mortgage. They want the added security of knowing they may collect on your life insurance policy if you don't make your payments.
A collateral assignment may be for a portion or all of the policy's value, with recipients receiving the excess, if any, remains. Knowing about a collateral assignment is important to understand the basic information before getting it. Life insurance might help you get a loan approved if you make a collateral assignment.
At Leigh Insurance Agency, we aim to provide comprehensive insurance policies that make your life easier. We want to help you get insurance that fits your needs. You can get more information about our products and services by calling our agency at (904) 826-0799. Get your free quote today by CLICKING HERE. Any coverage discussed is not guaranteed. Please contact us today to go over your policy to ensure your needs are met! We are here and happy to help.