Advertiser Disclosure

Homeowners Life Insurance: How Life Insurance Protects a Mortgage

Homeowners life insurance is an important consideration that many new and established homeowners forget to think about.

Want to Earn Some Extra Money?

  • SurveyJunkie: Earn up to $50 per survey with one of the highest-paying survey sites on the web. Join SurveyJunkie Now
  • Mistplay: Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing new games with cash rewards. Download Mistplay for Free (Android only).
  • Robinhood: This investing app lets you trade stocks and do everything for free and takes no fees — ever. Better yet, if you join through this link you can get a free stock like Apple, Ford, or Sprint when you join (must complete signup).

Buying a home is a major accomplishment. You’ve saved and budgeted, getting your finances ready to pay for the mortgage and everything else that comes with owning a home. Once you’ve put down the deposit and signed the paperwork, you’re set, right? Not quite.

Life insurance is an important consideration that many new and established homeowners forget to think about. A flexible policy, that can be adapted to your changing needs, and could be an important part of ongoing homeownership. As long as you avoid common life insurance mistakes, it can offer financial protection for you and your partner.

Life insurance for homeowners

Life insurance is generally thought of as something for families. While having children is the top reason for many to seek cover, buying a home is a close second. Protecting one’s dreams or future is a common desire of life insurance seekers, and buying a home can be a big nudge towards getting insured. A policy could help you continue to pay the mortgage if you were seriously injured or diagnosed with a terminal illness. It could also allow your partner or family to keep the house if you were to pass away.

But taking out a policy is only the first step. It’s easy to leave things on autopilot when life gets busy, but life insurance isn’t a “set it and forget it” product.  An annual check of an existing policy might also be an important part of a homeowner’s financial strategy.

How mortgage life insurance works

It’s simple, if you have mortgage life insurance then it will pay off the balance of your mortgage if you pass away. The payment would go to the lender and not your family. The payout amount always matches your remaining mortgage balance, so the payout decreases over time. It may make sense to just go with a term life insurance policy since policy covers more than just the mortgage balance. Mortgage life insurance makes sense if you need help covering the mortgage but wouldn’t qualify for term life insurance because of poor health risks.

Term life insurance can cover your mortgage

Want free money?

  • Aspiration: Want to get spotted a $100 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch, just use your card to make at least $1,000 in cumulative transactions within 60 days of opening an account. This bank account is legit and only takes two minutes to sign up for an account.

If you have term life insurance like Bestow, it can be set up in a way that it can cover your mortgage should you pass away. For example, if you have 15 years left on your mortgage, you can buy a 15 year term life policy. That’s a great way to set up protection for you and your family so your mortgage can still be affordable in the event of your passing. Generally, whole life insurance is a bad investment, for these reasons, so we won’t cover that here.

The perils of underinsurance

Many countries have an underinsurance problem. In fact, recent research found that only 30-37% of adults hold life insurance, and those that do hold it generally do not have enough. This gap in life insurance coverage leaves people financially vulnerable to the tune of just over $1.8 billion!

If you already had life insurance before purchasing a home, you might want to check your policy after moving in. The cover amount chosen when you first got insured may no longer be enough, especially if you’d want the benefit to go towards mortgage payments or pay the house off in full.

Home renovations may be another time to reassess your life insurance needs. Added debt to pay for the remodel, be it through refinancing or taking out a loan, can affect mortgage payments.

The Bottom Line

Getting a life insurance policy could be a smart move for new or established homeowners. It’s just one way to help protect your investment, whether it’s for yourself or a growing family. If you’re buying your first home or renovating an existing property, consider how life insurance might fit into your property plans.

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $200 and fluctuates based on market movements. You’ve got nothing to lose.
Brian Meiggs
Brian Meiggs
Brian is the founder of My Millennial Guide and is an entrepreneur who has spent the last few years creating websites and building brands. He has been quoted in several online publications, including Yahoo! Finance, NASDAQ, MSN Money, AOL, Discover Bank, GOBankingRates, Student Loan Hero, Fit Small Business, Cheapism, SmartAsset, Bankrate, RISE Credit, AllBusiness, Cheddar, Commonbond, Niche, Rewire, Credit Donkey,, and more. He believes that the true path towards financial independence is through increasing your earning potential (even if you have a 9-5 job).

Related Posts

Do NOT follow this link or you will be banned from the site!