What do mortgage interest rates have to do with life insurance?

Posted on September 28, 2020October 19, 2026 by McGriff-Williams in Life Insurance, McGriff-Williams News |

You may have heard that, or even capitalized on, mortgage loan interest rates being at historic lows lately. That has in turn resulted in more homes being purchased. And what do people consider their biggest financial asset and also their financial safe haven? Their home. Many new homeowners will obtain life insurance upon purchasing a home, with the thought that their biggest bill (the mortgage) would be covered in the event that they pass away. Are you seeing the connections now between homes, mortgages and life insurance?

Let’s dive a little deeper… Let’s talk about a form of term life insurance that may connect the dots even more called mortgage protection life insurance. Any new home owner is inundated with information on this but very few bite, for good reason. Mortgage protection life insurance operates just like a regular insurance policy: an individual buys coverage, pays premiums and if the policyholder dies during the term, the policy pays a death benefit.

There are some significant differences though. Unlike a traditional life insurance policy, the death benefit of a mortgage protection policy goes directly to the mortgage company or lender, not the policyholder. Also, the total death benefit is designed to decrease year after year as the mortgage is paid down. And lastly, mortgage protection insurance tends to be more expensive than a comparable term life insurance policy.

On the flip side, regular term life insurance is typically low cost and gives policyholders the flexibility to use its benefits any way they wish and they can set their own benefit amount. In a payout event, term life insurance provides beneficiaries with a tax-free lump sum of cash (annuities are also available) that can be used for mortgage repayment or other things such as retirement savings, college savings, or day-to-day bills. That is up to the discretion of the beneficiary. And the coverage amount stays the same, regardless of how long or what may have occurred from the time it was purchased.

Another reason that now, rather than later, is a good time to consider life insurance in any form or fashion is that the premiums are typically much lower for a younger individual and there can also be little to no medical underwriting. So while you may view a new home as an asset, it’s also a debt (until paid for, of course) that your family would be stuck with unless you prepare accordingly.

Whether or not you’re in the market to purchase a home, or if you already have and just skipped the next step of life insurance… We’re happy to help guide you and help you rest assured that your family is well taken care of. That peace of mind is a much larger asset than any home in the world could ever be.

Key Person Insurance: How It Works and Why It Matters

Most owners think about life insurance for their families. Fewer think about what happens to the business if an owner or a key employee dies or can’t work. Key person insurance is one way to plan for that.

This is general information, not legal or tax advice. Talk with your attorney and your CPA before you buy a policy for your business.

What key person insurance is

Key person insurance is a life insurance policy a business buys on someone whose loss would hurt the business. The business usually owns the policy, pays the premium and is the beneficiary. If that person dies, the business receives the money.

A key person is often an owner, but not always. It can be anyone whose skills, relationships or knowledge would be hard to replace quickly:

The person who brings in most of the new work
The person a major customer insists on working with
The one who holds the licenses, bonding relationships or technical knowledge the business runs on
The person who has personally signed for the business’s loans

What the money can do

The business decides how to use the money. Common uses include:

Covering lost income while the business adjusts
Recruiting, hiring and training a replacement
Paying down business debt, or reassuring lenders and customers
Giving the remaining owners time to decide what’s next

Don’t forget disability

A long illness or injury can hurt a business as much as a death. The Social Security Administration estimates that about 1 in 4 of today’s 20-year-olds will become disabled enough to qualify for Social Security disability benefits before age 67. More than 1 in 8 will die before that age. Key person disability coverage can pay the business if a key person can’t work, depending on the policy’s terms. Owners can also look at disability insurance that replaces their own income, and at coverage that helps pay business overhead while they recover.

Key person coverage and buy-sell agreements

A buy-sell agreement is a contract among a business’s owners, and sometimes the business itself. It sets out what happens to an owner’s share if they die, become disabled or leave. Life insurance is often used to fund it, so the remaining owners or the business have the money to buy the share from the owner’s family.

That’s a different job from key person coverage, even though both use life insurance. How the policies are owned and who the beneficiary is can change the legal and tax results. Your attorney and CPA should set up the agreement. We can help with the insurance that funds it.

When a lender asks for it

Some lenders ask for life insurance on a key owner as a condition of a business loan. The policy may be assigned to the lender as collateral, which means the lender is paid first, up to what’s owed. This is called a collateral assignment.

How much coverage?

There’s no single formula. Some questions to start with:

How much income would the business lose in the first year or two without this person?
What would it cost to find, hire and train a replacement?
How much business debt would need to be paid, or would a lender call a loan?
For a buy-sell, what is the owner’s share worth today?

Insurance companies will also look at the person’s role and the business’s finances when deciding how much they’ll offer.

An IRS rule to know first: notice and consent

When a business owns a life insurance policy on an employee, federal tax law has notice and consent rules. In general, before the policy is issued the employee must be told in writing that the employer plans to insure their life and for up to what amount, and that the employer will be the beneficiary. The employee must consent in writing, including to the coverage continuing after they leave the job.

These rules matter when a claim is paid. In general, the death benefit is left out of the business’s taxable income only if the notice and consent steps were done before the policy was issued and an exception in the law applies. Common exceptions cover a person who was an employee at any time in the 12 months before death, or who was a director or highly paid employee when the policy was issued. Others apply when the money goes to the person’s family or estate, or is used to buy the person’s ownership share from them. Otherwise, the part of the death benefit above the premiums the business paid may be taxable income to the business.

Businesses with these policies also generally file IRS Form 8925 each year. Ask your CPA to confirm the steps before the policy is issued.

Next steps

List the people your business couldn’t easily do without.
Talk with your attorney and CPA about buy-sell agreements and tax treatment.
Talk with us about life and disability options, and how they fit your business continuity plan.

Sources

This is general educational information, not legal or tax advice. McGriff-Williams Insurance does not provide legal or tax services. Coverage, underwriting and tax treatment depend on the policy, the people insured and your situation.

Questions? A licensed member of our team can talk it through with you. McGriff-Williams Insurance is an independent insurance agency in Gainesville, in business since 1983 and licensed in Florida. We’re at 3501 W University Ave, Gainesville, FL 32607. Call (352) 371-7977, Monday to Friday, 9 a.m. to 5 p.m. You can also visit our life insurance page.

Where confidence grows.

Last updated October 31, 2026

Benefits of Auto Pay for Your Insurance Premiums

Posted on March 17, 2020October 27, 2026 by McGriff-Williams in Auto Insurance, Blog, Disability Insurance, Health Insurance, Home Insurance, Life Insurance, McGriff-Williams News |

We currently happen to be in a time of uncertainty with some businesses temporarily closing or being short staffed due to Covid-19 social distancing recommendations. One of the concerns that has developed is people still being able to pay their bills, such as insurance premiums.

Thankfully, most insurance carriers accept payment either online or via an automated phone system but Auto Pay could alleviate any worry or doubt you might have about these payments being processed correctly and on time. There are several benefits to Auto Pay, depending on what type of policy it is.

– When it comes to life or disability insurance, a lapse without timely reinstatement could mean that you will now require an underwriting review, sometimes involving medical evidence or you could even have to secure new coverage at your current, older age and possibly lesser health.

– For a health insurance policy that cancels due to late or non-payment, it cannot be reinstated at all and you would be left without coverage until the next open enrollment period for the following year. Scary, right?!

– For auto or home insurance, it would depend on the company if they were willing to reinstate or rewrite the coverage. The biggest risk here is that something detrimental and very expensive could happen in that lapse period where you would have no coverage at all.

Auto Pay is convenient, yes. It saves paper and printing costs, yes. It’s peace of mind and one less thing to worry about, yes. But it’s also imperative for maintaining some pretty important coverage. This is coverage that you may not be able to get back if you elect to receive a paper bill that gets lost or doesn’t get paid. An Added bonus is cost savings as well you can almost always save on installment fees by going this route.

If you’re able to arrange Auto Pay either through EFT (electronic funds transfer from a checking account), recurring credit card, online bill pay with your bank, or whatever options there are it’s definitely the safest way to ensure that your coverage will not be interrupted or affected.

If you have questions about a specific policy or company that we work with, please let us know anytime at info@mcgriffwilliams.com or (352) 371-7977.