What are the different types of life insurance for homeowners?
There’s no specific life insurance type for homeowners. Most existing life insurance options can work well, depending on your overall needs. The most basic policy types are term life insurance and whole life insurance. A term life insurance policy has a level premium for a specific period, such as 10, 20 or 30 years. Your coverage ends once the specified term is complete, and therefore, a payout only happens if the insured’s death occurs during that term.
Whole life insurance, or permanent life, provides coverage for the insured person’s lifetime as long as premium payments are in good standing. These policies build cash value, which a policyholder can access under certain conditions.
For homeowners looking to specifically provide funds for their family to remain in their home, “A term life insurance policy is a perfect match for this need,” Oster says. Why? A term policy covers you for a specific amount of time, usually from 10 to 30 years. Most mortgage loans range from 10 to 30 years as well. “You can absolutely tie the length of your term policy to the length of the mortgage,” Oster says. So, if you have a 30-year mortgage, purchase a 30-year term life insurance policy. If you pay off your mortgage early, you can cancel your term policy and consider using the term premium funds instead to buy a permanent life insurance policy.