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Homeowners and Life Insurance: What to Know and When to Have It | Bestow

take a deep breath, you’ve done it. you bought (or plan to buy) your first home. It can be a long, tiring and expensive process, but once it’s over? you are a first-time homeowner.

It’s a good feeling, right?

Reading: Life insurance when buying a house

once you’re finally done with all the effort of buying your first home, it’s just as important to protect your investment. You’ll probably have it all figured out with homeowners insurance, but what about life insurance? You can sleep a little easier knowing that if you pass away, a life insurance policy payment could help your loved ones continue to service the mortgage. Here’s why it can be important to get life insurance as a homeowner.

Why do you need life insurance as a homeowner?

Home ownership brings countless new responsibilities. the most obvious: your mortgage commitment. For the foreseeable future, you and your partner are responsible for making sizeable and timely mortgage payments. but hey, you planned it, so no problem.

But what if one of you died? your surviving spouse (and any children who have entered the mix) will be left with the mortgage payments, as well as car payments, utility costs, and other bills. While your mortgage servicer and utility providers can express their sympathy, your main concern is getting payments on time, even if your family has suffered a tragedy. And while some may offer a short grace period, your loved ones will ultimately be responsible for those bills in full.

As a homeowner, it’s important to consider life insurance coverage for any personal property you haven’t paid for in full. A life insurance payout can help keep your family on track after an unexpected death by helping them keep their home and current on other bills.

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the different types of homeowners insurance policies

The good thing is that there are different life insurance coverage options that allow you to choose the best life insurance coverage for your situation. Different types of insurance products to consider include:

  • Term Life Insurance Policy: Term life insurance provides life insurance coverage for a specified period of time. If you were to die while owing a significant amount of mortgage debt, a term policy could potentially provide more than enough cash to pay it off. Term life insurance is offered by a life insurance company, not your lender.
  • Mortgage Protection Insurance (MPI) Policy: Mortgage Protection Insurance, Also called mortgage-protected life insurance, it is specifically designed to protect the borrower and their loved ones by providing the necessary funds to cover the mortgage if they are temporarily unemployed, or pay it in full if they die unexpectedly. mpi is offered through your lender or an unaffiliated insurer.
  • private mortgage insurance (pmi) policy: private mortgage insurance, on the other hand, protects your mortgage lender. pmi only pays your mortgage balance if you default and doesn’t protect you after job loss, disability, or unexpected death. Lenders generally require you to purchase PMI if your down payment is less than 20%.

See also: Understanding life insurance company ratings | Protective Life

The death benefit can be used as needed and could help pay off your mortgage balance as well as provide additional benefits to loved ones.

can cover mortgage payments if you lose your job or become disabled for a limited time.

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minimum or no subscription, so the cost is based on the amount of your mortgage, your age, and your smoking status.

you pay level premiums as mortgage debt decreases.

Your loved ones do not receive a death benefit.

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determine what type of insurance you need

To determine which type of insurance is right for you, you need to assess your financial needs and those of your family. Calculate how much life insurance to buy by considering, along with your mortgage, family expenses such as the cost of food, utilities, child care, education, cars, extracurricular activities, and home maintenance.

If losing your income means your family won’t be able to meet current or future financial obligations, the amount of coverage offered by mortgage protection insurance and private mortgage insurance may not be enough. For a similar fee, term life insurance can cover the cost of your mortgage, as well as child care, your family’s monthly expenses, and even college tuition.

See also: What is Lenders Mortgage Insurance (LMI)?

Once you’ve determined your family’s expenses and needs, you can calculate the amount of coverage and term insurance option that’s best for you.

frequently asked questions

do you need life insurance when buying a house?

It is not a legal requirement to have life insurance before purchasing a home. however, because homes are such a large expense, some lenders may not approve mortgages for borrowers without current life insurance policies.

what is the difference between term life insurance and whole life insurance?

Term life insurance provides coverage to the policyholder for a set period of time, such as 10, 15, 20, 25, or 30 years. that’s the “term”: a period he chooses when he buys his policy. Coverage amounts can range from $50,000 to millions of dollars, and you pay a flat monthly premium for the duration of your term.

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Whole life insurance, on the other hand, is a type of permanent life insurance, meaning policyholders are guaranteed a death benefit. some policies even offer a cash value. Whole life insurance is more expensive than term life insurance, when comparing policies with the same amount of coverage.

If you’re looking for more information, we’ve covered the differences between whole life insurance and term life insurance in more detail.

choosing the right life insurance for first-time homebuyers

“Best” is subjective, even when it comes to choosing life insurance for new homeowners – it’s a big, important purchase. Before deciding on mortgage protection or life insurance coverage options, shop around and compare several offers.

with grant, you can match your mortgage amount, and it can cost less than $1 per day. Applying for a policy also takes less time than signing closing papers.

You’ve worked hard to buy your first home. Help protect your family by choosing the life insurance that’s right for you, so they can continue to enjoy all your hard work, even if you’re gone. find the coverage amount and option that’s right for you today.

See also: Why aren’t hearing aids always covered?

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