What type of insurance is needed to cover a mortgage?

 
 
Posted9/25/2020 7:01 AM

Q: Our mortgage company recently sent us an offer for us to buy credit life insurance. They claim if one of us dies, the insurance company will pay off the balance of our loan. We have three kids and if either of us was unable to work or died, the other would not be able to pay the mortgage and all the other bills. This seems worth considering though the cynical side of me says I should investigate further. Any opinions on this?

A: Yes, don't buy credit life insurance from your mortgage company. This is not because protecting yourselves from the loss of one of your incomes is a bad idea. This is because there are better and cheaper ways to accomplish this.

 

A basic credit life policy says that for a defined premium, the insurance company will pay the balance of your mortgage if a specifically identified party (one of the two of you) perishes or, for a larger premium, if either of you perishes. The problem with this is twofold.

One, as time goes on, the benefit of your policy decreases because the balance on your mortgage decreases. However, the premium does not decrease so you end up paying the same annual amount for a decreasing benefit. Two, the cost is far greater than if you simply purchase term life insurance. There are many variables of course, but one can usually purchase a great amount of term life insurance for not much money. And, of course, the younger you are, the cheaper the premium.

Have a conversation with your favorite insurance agent and compare the costs of a term policy with what your lender is offering. Your decision on which way to go will be easy.

Q: There is a vacant lot in town I wish to purchase. I would like to build a house that is somewhat different. I am not sure I will be able to get village approval to build this house. How can I purchase this property but at the same time protect myself if the village turns me down?

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A: Include a contingency in your offer. Make the contract subject to village approval of building plans.

Prior to making the offer, speak to someone at the village building department and ask how long a typical approval for a building permit might take. Determine if a variance or a zoning change is necessary and, if so, inquire the time frame for approval on these.

Once you have an idea how long full approval will take, add a provision to your offer that states that the contract is contingent on your obtaining full approval for the construction of your residence within X amount of days from the date the seller accepts your offer. The provision should further state in the event you are unable to obtain full approval within the specified time period and you give notice to the seller within that time period, the contract is terminated and your earnest money deposit is returned in full.

Q: I have heard that I have longer to pay my real estate taxes than what it says on my tax bill. Is this true and, if so, how long do I have?

A: 2019 Cook County second installment real estate taxes were due in early August; however, due to the pandemic, Cook County property owners have until Oct. 1 to pay their second installment tax bill without the usual 1.5% per month penalty being assessed.

After that date, penalties start accruing. Surrounding counties have also announced extended periods to pay real estate taxes. Check the treasurer's website in your county to determine if an extension applies to your property.

• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.

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