Home equity lines of credit are the loans secured through the equity on a home. They enable homeowners to do improvements or use the finance to fund something else including securing other equity. How does this relate to life insurance, and why should these agents consider getting home equity lines of credit?
One of the benefits of using home equity lines of credit is they allow people to borrow against the value of their home again and again. Often, these are low interest and tax-free. Once the borrower has paid back the loan they are free to borrow again, similar to a revolving credit card.
How It Relates to Life Insurance
In a life insurance policy, healthy individuals will have built up some equity and could potentially borrow some money from the account. As people live longer or children have grown up, the life insurance payment in case of death could be borrowed against, with a lower payment if someone dies.
1. There Are Various Ways of Offering a Loan
Home equity lines of credit can be offered in a variety of ways to suit both the lender and the client. You can get them as an online transfer, using a credit card transfer linked to an account, or by writing a check. Just as there is with a standard loan, using invoice factoring in slow repayments will help you manage the money. All these can be worked into the role of a life insurance agent so you are offering much more to eligible clients.
2. Fees and Tax
Although home equity lines of credit tend to have low rates of interest, they are appealing to lenders as well as the borrower. It gives the borrower opportunities to pay back with easy terms. For the lender, there is an opportunity to get some income from the interest rate.
For a Life Insurance Lender
As a life insurance agent, that income from interest is an extra opportunity to generate funds that would not previously have been available. Taxation is usually free so there’s a win-win situation for both the lender and borrower. As with any loan, interest rates can go up or down which affects repayments.
3. It Can Keep People Healthy
Some people need to borrow money for medical treatment. By using the principles of home equity lines of credit with life insurance, they have an opportunity to borrow money for treatment. It allows them to recover, pay back the loan and continue their life insurance cover. Just as you have to have equity in your home to get a loan, a person would need to be healthy and not have any exclusions to be able to borrow against life insurance. Another option would be to use the equity in the life insurance to pay for care with a decreased payout at the end of the policy. A factoring company can help monitor the loan.
4. People Can See the Value of Borrowing
One of the benefits of a home equity line of credit is that a borrower has already contributed to the house from mortgage payments and can see how they can use the equity helpfully. This is likely to be similar to life insurance where people have contributed for years. By releasing the equity and getting a lower final payment, there are lots of things a person can use the money for—especially if they have no dependents or major outstanding loans.
5. Sell It as an Emergency Fund
One of the benefits of selling this type of loan is that you can use it to promote life insurance policies. You most probably encounter people who don’t see the value of a life insurance policy, but being able to promote the emergency loan aspect can result in more sales. You can also work in partnership with mortgage dealers who promote home equity release as many homeowners will also need to take out a life insurance policy.
Watch for Red Flags—For Lenders
As with any loan, a lender has to watch for red flags. Anyone without equity cannot get a loan from their property. With life insurance, key risks would be someone with dependents and an outstanding mortgage. You also need to do a credit check as with any loan set up. But there are lots of opportunities to responsibly loan someone the finance from their life insurance policy which could make a difference to them.
With people living longer and many people with no dependents who are sitting on equity in insurance policies, there has never been a better time to work out how to make the money work harder to benefit the client. If you were thinking about what a factoring company is, there are ways they can help with this type of loan. Offering equity release on life insurance just like home equity situations will be of interest to many clients looking for low-cost loans and finance. Check out the details today.