Answer New and existing homeowners may benefit from having life insurance, but what kind of policy might be best depends on your circumstances. Ultimately, as a homeowner, your decision to get life insurance should be based on your financial objectives.
Here are some things to think about:
A life insurance policy can provide a source of financial support for your beneficiaries in the event of your death.
More than one type of life insurance policy might help you meet your goals.
If you want your policy to serve the goal of paying the mortgage , the amount and duration of your mortgage may be important factors in your choice of one type of life insurance coverage over another.
Life insurance can be used to provide support for loved ones in the event of the policyholder’s death. If you’re a homeowner with a mortgage, life insurance can help you ensure that your beneficiaries have the ability to pay off your mortgage if you were to pass away unexpectedly, so your survivors are not left with the burden of mortgage payments.
Unlike traditional mortgage protection insurance, a life insurance policy isn’t restricted to paying only the balance of your mortgage to the lender. In the event of your death, your beneficiaries can choose to use life insurance proceeds for expenses such as:
A child’s college tuition
And, unlike typical mortgage protection insurance, the amount of your life insurance policy’s death benefit does not decline with the balance of a specific mortgage. If you refinance your home, your original life insurance policy is unaffected.
These key steps can help you select a life insurance policy:
Determine how much coverage you want. This will depend on factors such as your mortgage balance, other debts and your family’s financial goals.
Think about how long you would want coverage to last.
Decide how important it is to you to keep your insurance premiums level over time.
There are three categories of life insurance coverage that homeowners may consider.
A term life insurance policy can provide coverage with a level premium — one that doesn’t change — for the period of time you select as its term. For example, you can match your coverage period to the time left on your mortgage, such as 10, 20 or 30 years. If you pass away during this period, your beneficiaries will receive a death benefit that can be used to help pay off the remaining balance on your mortgage. If you still need coverage after that level premium period, you can keep the policy in force, but costs increase each year as you age.
A whole life insurance policy can provide permanent coverage for your entire life1, including the length of your mortgage. In addition to providing a death benefit that can be used to help pay off your mortgage, whole life insurance also includes a cash value component that can accumulate over time. It can be used to pay for your premiums or other expenses.
Universal life insurance is similar to whole life insurance in that it can provide coverage for your entire life2. However, it offers more flexibility in terms of premiums and death benefits, which can give you the ability to adjust your coverage as your needs change.
Life insurance premiums can vary widely depending on the type of policy you choose, your age and health, and other factors. It’s important to think about how much you can afford to pay in premiums and to consider a policy that provides the coverage you want at an affordable price.
Selecting the right type of life insurance policy as a homeowner requires careful consideration of your financial situation, goals and loved ones’ needs. Your local Farmers® agent is here to help you navigate the options as you choose the best policy for your individual circumstances. Find an agent.
1 Lifetime coverage (or life of the policy) is guaranteed provided premiums are paid per the terms of the contract.
2 Lifetime coverage (or life of the policy) is guaranteed as long as all premiums are paid to keep the policy in force. The cost to keep your policy in force will increase over time.
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