IRS and insurance: what are the tax deductions

Anyone who has ever negotiated a spread knows that one of the topics always on the table is the inevitability of taking out life insurance that pays off the home mortgage in the event of a fatal accident.

Protecting the family home is a good thing. However, we may be fooled into thinking that this insurance is enough to make us sleep soundly. It turns out that only life insurance is associated with real estate credit it is not enough to guarantee your future and that of your family.

What does home mortgage insurance cover?

He found the house he had always wanted and took out a mortgage. Among the products traded to reduce the spread is the bank’s life insurance. He likes the idea.
You should ask yourself two questions: 1- Are you paying the right price for this insurance (Home Credit Life Insurance)? 2 – And is it enough to guarantee a stable future (daily expenses, school expenses…)?

What does your family need?

Half of Portuguese people can save up to €100 a month. In a family, if one of the parents dies or becomes disabled – typical guarantees of life insurance – the decline in monthly income will cause a hole in the family finances.

Even if paying off your loan is no longer a worry, there are many other expenses that don’t go away. And these must be guaranteed.

Retirement life insurance is the solution

If young couples are unable to accumulate a considerable sum of money in a short period of time, which can protect their future in the event of misfortune, the most effective way to access reasonable capital is through life insurance, other than that which guarantees the payment of the home loan. Remember: the younger, the cheaper!

There are solutions such as Family Protection from General Peace of mind who respond to situations of death, disability and serious illness. And is it possible to have more than one life insurance? In the same company? Will the various capitals pay in the event of an accident? The answer to all these questions is yes.

From the moment the insurer agrees to take out this insurance, you will be able to have the contracts you want and receive, in the cases provided for by the policy, the capital value.

And how much capital should you hold?

The goal is to compensate for the loss of income over a relatively long period. Let’s take an example to help. Let’s imagine a family in which one of the parents has a monthly salary of 1,000 euros. When a fatal accident occurs, they lose that income. On the one hand, due to the life insurance associated with the credit, they no longer pay the house mortgage, which represented a cost of 400 euros per month. They will therefore have to compensate a loss of 600 euros. Doing the math, 600 x 12 = 7,200 euros per year.

Considering that you intend to ensure a child’s education up to university, for example, this value will need to be multiplied by the years remaining until the course is completed. Let’s say there are 16 years left. Therefore, the insurance capital should be around 115,200 euros (7,200 x 16).

Create your table:

• Loss of income			Years to adulthood	Capital to be insured
  Performance monthly	End of responsibilities (real estate credit, eg)	Total
  €1,000	€400	€1,000 – €400 = €600	16	600x12x16 = €115,200

The importance of disability

There’s one more detail we need to talk about: disability coverage. Let’s be clear. A death is always a dramatic event, but sometimes a permanent disability puts a family in an even more complicated situation. We know that, in these cases, financial aid is never sufficient, given the drop in income and the growing expenses resulting from the new reality, which can translate into the need for home adaptation work, resorting, among other things, to the help of third parties.

It is essential that the insurance policy contains a disability guarantee. And don’t accept any disability. Make sure you receive the capital if you are unable to continue your professional activity. This is the protection you are interested in. While it may be a little more expensive, the broader the concept of disability, the higher the level of protection.
Confirm that the disability life insurance coverage associated with your home loan is comprehensive enough to ensure that, in the event of an unexpected event, your home will actually be paid off.

About this the most advisable thing is to have a disability percentage of 66% or even 60%so be careful, in most cases banking institutions only require the least complete disability, which can be activated in the most serious cases: absolute and definitive disability which normally requires a degree of disability greater than or equal to 85%.