Do you need life insurance when you buy a house?
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Asked April 27, 2011
The simple answer to this question is that you are not required to have life insurance to buy a home. In some situations, the cost of an existing life insurance policy could interfere with your ability to qualify for a home purchase. And this is not to say that you do need life insurance, it merely points out that having such coverage is not a requirement for owning a home.
On the other hand, if you own a home you should probably think about taking out a term life insurance policy to cover the cost of the mortgage. This protects the home from foreclosure in the event of your death, and guarantees your family a place to live even if the main family money-earner passes away. Any term life insurance will work, but there are special types of term life insurance that have been developed especially to provide for mortgage concerns.
Mortgage life insurance and decreasing term life insurance serve as a suitable form of life coverage for homeowners. In both cases, the amount of the coverage decreases over time as do the premiums associated with the policy. As your mortgage gets smaller because of payments made, you need less coverage to protect the home in the event of your death, and a decreasing term life policy fills that bill. On the other hand, a regular term life policy retains a full pay out amount throughout the course of the policy, and that could mean extra financial assistance for your family during a time of high anxiety.
Whole life insurance is suitable as a form of insurance to protect the home, but whole life policies can last for upwards of 50 years, much longer than your mortgage, resulting in paying for a policy you do not need long after the home has been paid off. When purchasing life insurance to offset specific costs, term life policies are better suited, where whole life, universal life, and variable life are better suited for final expenses, investment tools, and more dependable financial stability for the beneficiaries of the policy.
Answered April 27, 2011 by Anonymous