Since we can’t always predict the future, buying a new home is a prime time to consider how you can gear up to ensure that the mortgage and other expenses don’t become a burden on your family - or worse – lead to a forced sale or foreclosure.
If there are two income earners in the household, ideally, both should have life insurance policies, particularly if you’ve made large financial commitments such as buying a house (or having kids). Several types of life insurance products can meet your basic coverage needs, but some may have limitations and others can be prohibitively expensive. For many new homeowners, the most affordable choices are mortgage life insurance and/or term life insurance.
As its name suggests, mortgage life insurance is designed around your mortgage debt. The policy payout, called a death benefit, is often payable to your mortgage company for the outstanding balance of the mortgage if you die while the policy is in force. The mortgage company is usually named as the beneficiary and your coverage amount goes down as your mortgage balance goes down. Mortgage life insurance is really coverage protecting the lender as opposed to a policy that provides for your family’s future. It’s common for lenders to offer this coverage as part of a mortgage package.
A term life insurance policy provides more flexibility than a mortgage life insurance policy. You choose the beneficiary, the amount of coverage, and the length of the policy, customize the policy to your family’s specific needs. The mortgage is only one expense in your household, particularly if you have children. Auto loans, credit card balances, and other ongoing expenses don’t go away if the mortgage is paid off and these other expenses can easily add up to more money paid out monthly than the mortgage itself.
A term life policy gives you the option to choose higher coverage amounts when needed to cover other household expenses and to help ensure a more comfortable lifestyle for your family. For example, if your mortgage amount is $300,000 and you want to add $200,000 in additional coverage to provide for life’s necessities, you can easily apply for a higher amount of coverage. This ensures there is enough to pay off the mortgage, and as the mortgage balance is paid down, it can provide additional funds for life’s expenses. You might choose a 30-year term policy for a 30-year mortgage or a 20-year policy if you choose a shorter mortgage length, like a 15-year mortgage. For a 35-year-old female (non-smoking) in excellent health, your monthly rate when applying with Ethos could be $29/month for a coverage amount of $500,000.
A term life insurance policy typically offers the best value for many households because you can choose the coverage amount, select your beneficiaries, and choose a term that’s customized to the length of your financial commitments.
If you’re interested in learning more about applying for life insurance with Ethos, you can get started by filling out a few questions to get a quote.