A person called me recently about an urgent need to discuss life insurance.
“Next week works for me,” I said. But that wasn’t satisfactory. It had to be sooner. I asked about the urgency.
“I’m turning 70 on Monday and my mortgage insurance is due to expire.”
I asked a few more questions and started the search engines, looking for the best rate for a 70 year old to cover his mortgage.
When we met, the client was upset to have discovered his bank mortgage insurance was voided on his 70th birthday. He was certain the mortgage company had never told him about that limit.
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I don’t think most people expect to be carrying a mortgage at age 70, but looking at the cost of buying a farm, machinery or new “starter homes” in some cities, it’s not out of the question.
I checked with various financial institutions to find out when life insurance coverage ends on loans and mortgages. The following is based on taking the life insurance option offered by the institution when arranging a mortgage.
Mortgage insurance can be purchased up to the age of 65, if you are healthy. It expires at age 70.
On loans, you can get insurance up to age 69, again if health is on your side.
Of interest to the farming family is the operating loan or line of credit. Line of credit or operating loan insurance can be bought up to age 64, but expires at 65.
Life insurance bought through a bank or trust company expires at age 65. The average age of a prairie farmer is 55, so it stands to reason there are a lot of farmers still carrying either an operating loan or line of credit. They should check with their financial institution.
I sell a fair amount of term life insurance for debt coverage that is renewable and convertible, meaning you can renew it if you are within the age restrictions, or you can convert it to a permanent type of insurance. It puts you and your family in control of the debt.
For example, a married farmer has a $150,000 line of credit extended and insured through the bank. The farmer dies. The bank pays itself $150,000 and clears the loan because the insurance was on the line of credit, not the person.
However, if the insurance was carried through a life insurance company, the $150,000 is paid to the surviving spouse.
The spouse could chose to pay down $100,000 of the line of credit, invest the other $50,000 and continue making payments on the reduced line of credit. In this case the person is insured, not the debt.
