Life Insurance
Most American Homeowners Are Underinsured
Ethos Life · Oct 29, 2018
man, woman, and dog in car
Few things are more life-changing than buying a home. It’s your slice of the American Dream, a place to raise your family and create memories for years. As your mortgage goes down, it becomes something more — financial stability. It’s hard to imagine plans getting off track, but your home is at risk while you’re still making payments. If you weren't around to cover the mortgage, it could become a financial burden on your family.

The Risks Of Owning A Home Without Life Insurance

Does your family rely on you for support? If you’re wealthy and there’s an estate plan to pass money along — great, but most of us don’t fall into that category.

A recent CBS News report found 40 percent of families would struggle within a month if their primary income earner passed away. The same report showed many Americans can’t scrape together $400 for an unplanned expense, so it’s easy to see how catastrophic an untimely passing could be.

If your family lost you, would they struggle without your income? Covering the mortgage could be difficult, but it could be easier with a term life insurance policy. You’ll likely sleep better knowing you’re not one of the 41 percent of adults without protection.

How Much Life Insurance Do You Actually Need?

What’s the right amount for your family? Well, it depends. There are a few ways experts calculate the number. One method — called financial needs analysis — considers everything you own. It estimates the total expenses in your absence, subtracts your assets, and covers the difference with insurance.

Immediate expenses may include your funeral and a period for grieving. After that, your family may need to pay for basic living expenses, children, and college. If running the numbers feels overwhelming, Life Happens has a calculator.

You may also want to pay off debt. If you’re like most people, your primary debt is your mortgage. Some people prefer a separate life insurance policy for this purpose. If you have $150,000 and 20 years left on your mortgage, you could buy a separate policy to match that amount and time frame. If you’re young and healthy, it may be more affordable than you expect.

How Life Insurance Payouts Work

When you buy term life insurance, you hope your family never has to collect. But the unexpected sometimes happens, and payouts can help in a very difficult time. While funds are not sent immediately once you're gone, the claims process is relatively simple to work through.

The people you have named — called beneficiaries — will generally need three documents to begin: 1) copies of your certified death certificate, 2) the policy documents, and 3) a claim form or request for benefits. In most circumstances, the extent of the burden on your beneficiaries is to call the insurer, send the required documents, and confirm receipt of the claim.

The next step is for the insurance company to check all the paperwork. Generally, your insurer will confirm that your policy is still active and that premiums have been paid, and that your beneficiaries, are in fact, who they say they are. Assuming everything is in order, your beneficiaries will usually receive a lump sum payout.

The proceeds can pay for day-to-day living expenses — like utilities, groceries, or gas — or larger bills like the mortgage or college tuition; it’s entirely up to your beneficiaries.

Protect Your Home With Life Insurance

In the event of a tragic accident, you can protect your family from struggling to pay the mortgage or, worse, from losing the home and stability for which you’ve worked so hard. Term life insurance is a simple, affordable way to protect your family. It may be one of the smartest decisions you’ll ever make.

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