As you pay your mortgage down, your house becomes something more - financial stability. However, your home can be at risk while you’re still making payments. If you weren't around to help cover the mortgage, it could become a financial burden to your family. Getting a term life insurance policy can help you avoid putting your family in that position.
Why Owning A Home Without Life Insurance Can Be Risky
Does your family rely on you for support? Would they have a difficult time making the mortgage payments if you weren’t around? If so, your untimely death could be catastrophic to the financial stability of your family. A recent CBS News report found 40% of families would struggle within a month if their primary income earner passed away. And the same report showed that many families can’t scrape together even $400 for an unplanned expense.
If your family lost you, would they struggle without your income? If you answered “yes,” consider an alternative outcome to this scenario. With the right term life insurance policy in place, if you were to pass away, instead of suffering financial hardship, your family could feel the security of remaining in a home that no longer has a mortgage. If you choose, you can apply for a policy that could cover any additional debt you may have, or future financial obligations, like college tuition for your children. You’ll likely sleep better knowing you’re not one of the 41 percent of adults without protection.
How Much Life Insurance Do You Need?
What’s the right amount for your family? Well, it depends. There are a few ways experts calculate the number. One method is a financial needs analysis, which considers everything you own and owe. First, you estimate your family’s total expenses in your absence. Then you subtract your assets and cover the difference with your insurance policy.
As a homeowner, you'll first want coverage to cover the mortgage. And then you'll add in your family's basic living expenses. If you were to suddenly die, your partner may have to cover childcare, education, and more. If running the numbers feels overwhelming, try this coverage calculator.
You may decide you are interested in protecting your mortgage separately from your other insurance needs. If that is the case, here is an example of how that can be done. For example, if you have a balance of $250,000 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, term life insurance may be more affordable than you expect.
How Term Life Insurance Benefits Work
When you buy term life insurance, you hope your family never has to collect. But the unexpected may happen, and the lump sum benefit provided by your term life insurance policy can help in a very difficult time. Once you pass away, your beneficiaries - these are the people you’ve named to receive your death benefit - will need to file a claim.
Your beneficiaries can work with the insurance company regarding the details, but they will generally need a copy of your certified death certificate and proof of their identity to complete the form that the insurance company will provide.
The next step is for the insurance company to process the claim. Your insurer will confirm that your policy was active at the time of your death. Assuming everything is in order, your beneficiaries will receive a lump sum payout equivalent to the coverage amount you choose. Your death benefit can be used for mortgage payments or your loved ones' living expenses if you pass away. How the money is ultimately spent will be entirely up to your beneficiaries.
Protect Your Home With Life Insurance
In the event of your death, owning a term life insurance can help protect your family from financial struggles, like paying the mortgage. Owning a term life insurance policy can help prevent the loss of 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 as a homeowner.