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Getting your first home is among the most exciting yet stressful times. You’re already involved in multiple tasks like -saving for a down payment, getting approved for a mortgage, and choosing the perfect house. With everything going on track, it’s becomes quite easy to overlook one critical aspect: life insurance. Although it might not appear a top priority, term life insurance is essential for first-time homebuyers. Here’s why you need coverage and how much you should buy.
Reasons to Buy Term Insurance to Cover Your Home Loan
- Lower Cost: Term life premiums are affordable. Purchasing a term plan allows you to pay one consolidated premium to protect your home and family, avoiding paying extra for multiple policies.
- Guaranteed Payout: Term insurance policies maintain the complete death benefit regardless of the cause, ensuring your family receives the maximum payout.
Finding the Ideal Life Insurance Policy
Term Life Insurance
- Pure death benefit protection
- Typically lasts 10-30 years
- Lowest cost option
- Great for mortgage/income protection
Permanent Life Insurance
- Lifelong coverage
- Investment/cash value component
- Much more expensive
As a new homeowner, likely in your 20s or 30s, term insurance policy alwaysmake more financial sense. You lock in low rates based on age and get pure debt/income replacement protection. Compared to expensive cash-value permanent policies, term insurance gives new homeowners the best coverage per premium rupees spent.
Tips for Purchasing Term Insurance
Here are quick tips for purchasing a policy:
1. Buy Soon After Home Purchase
Don’t wait to get coverage. Buying term insurance immediately after your home purchase locks in the best rates. This guarantees you don’t get a health condition, making you ineligible later.
2. Get Quotes from Multiple Insurers
Every life insurance company prices policies differently. Comparing quotes amongst top insurers ensures you find the cheapest premium for your situation.
3. Consider Group Life Insurance
If your employer offers group life insurance, use this inexpensive option first. Securing coverage through work boosts total protection.
4. Add Spouse/Partner as Co-Owner
Adding your spouse or partner as a co-owner justifies that they’ll still be financially protected if you pass away first. With that being said, the life insurance payout would go straight to them, which makes a big difference when they’re suddenly left trying to cover the mortgage and other bills on their own.
5. Pick Right Beneficiaries
Carefully consider naming beneficiaries—likely your spouse, children, etc. However, you can also designate mortgage/loan companies to have payments sent directly.
6. Calculate How Much Coverage You Need
Consider your income, mortgage balance, childcare costs, and your family’s lifestyle. Online calculators can help determine the right amount of coverage. Over-insuring wastes money, while under-insuring leaves them short.
7. Consider Converting Part of Policy to Permanent Life
Many term life policies allow a portion to be converted to permanent life insurance later. This provides lifelong coverage and a way to build cash value, and it can be a good approach as your needs evolve.
8. Review Policies Over Time
Reevaluate your term life policy upon changes—new home, kid, promotion, etc. This ensures your family always has adequate protection based on evolving needs and income. Shop for better rates if existing policy premiums increase substantially.
Conclusion
As exciting as buying your first house is, protecting it and your family with the term insurance ensures financial security. Term policies are highly affordable income replacement options that enable your loved ones to cover the mortgage, bills, healthcare, childcare and other expenses due to premature death. While no one likes to think about it, having coverage in place brings immense peace of mind.
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