6 Reasons New Homeowners Should Change Their Life Insurance Coverage
Here, we'll take a look at why it's a good idea to purchase a life insurance policy or alter an existing policy when you buy a home. A bank or lender doesn't usually require life insurance when buying a home, but it's a good idea to consider how a policy can benefit you and your family. Here are six ways that life insurance can help provide financial security after you purchase a home.
1. Make your mortgage payments
Do you need life insurance for a mortgage? Not officially. Your bank or lender is unlikely to require life insurance for a mortgage. But that doesn't mean it's not a good idea.
If you pass away, your heirs will still need to pay the mortgage. A good life insurance policy allows your beneficiaries to pay off the mortgage and not face the financial and emotional stress of moving or selling the home until they're ready to do so.
An Ethos term life insurance policy could mean that your heirs will have up to $2 million in benefits to stay comfortable financially and pay the mortgage bills when they come due.
2. Support your spouse
If you purchased your home with a spouse or partner, you could be relying on two incomes to make mortgage payments. A life insurance policy can supply a necessary influx of cash, especially if you're the primary breadwinner.
If your partner doesn't work, it may be even more vital for them to have access to financial assistance—not only to pay the mortgage, but to help pay off debts or manage day-to-day expenses, from gas to food costs. Unlike a will, which can get tied up in probate court, your partner could receive a payout reasonably soon after your passing.
3. Meet educational costs
One of the top reasons people buy homes is that their family is increasing in size. You want your children to live in a good neighborhood with a spacious backyard and enjoy all the other amenities of homeownership.
That's also an excellent reason to consider life insurance when buying a home.
Even if you don't need life insurance for a mortgage, you may be grateful for it if something were to happen to you before your children are grown and out of the house. The current average cost of a four-year college education, for example, is an astronomical $178K. Unless you've provided for your family by purchasing life insurance, they may struggle to afford that amount.
4. Premium costs increase with age
There's never a better time to purchase life insurance than in the present. You may be asking yourself, is life insurance necessary for a mortgage? But instead, consider asking: How much money can I save by purchasing my policy now?
Insurance companies calculate the amount you pay for your insurance premium partly based on your age. Younger individuals pay less than older people because statistically, they're healthier and thus more likely to live through their policy term.
However, it's important to note that some life insurance policies are specifically geared to benefit older adults, such as Ethos' whole life insurance for seniors, designed to provide peace of mind and financial support to those aged 66-85.
5. Life insurance can help you save
There are two primary types of life insurance: term and permanent. Term insurance provides financial security for young families purchasing a home for 10-30 years. Whole life insurance is the most common form of permanent insurance and stays with you for as long as you live.
Whole life has another benefit: a portion of your premium goes into a savings vehicle, called the cash value, and can be borrowed against if you need money. So, for example, if you've been in your home for ten years and you want to add a sunroom, you may be able to borrow some or all of the cost from your whole life insurance policy. But note that because Ethos whole life policies begin at 66, they're designed to provide security later in life and won't accrue enough value to be a significant investment vehicle.
6. Develop a financial strategy
Buying a new home can be an exciting time, especially if it's your first home. But, it's also an excellent time to sit down and take stock of your finances. If you've never had a policy before, consider adding life insurance when buying a house. Life insurance can play a primary role in helping you manage your finances.
Are you someone who needs life insurance now? Discover how much life insurance you need at Ethos Life. Once you've determined the best amount of life insurance when buying a home, you can quickly get an estimate, answer a few health questions, and apply for life insurance online with one of Ethos' no-medical-exam-required policies.