What Type of Insurance Do I Need So My House Will Be Paid Off If Anything Happens to My Husband?

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If your husband, who was responsible for paying all or part of the mortgage payment dies, and you still owe money on your home, it can be a financial disaster. Life insurance can provide the funds to pay off the home and let everyone keep living there. Be sure to purchase the right kind of life insurance to make sure the mortgage is taken care of.

Types of Life Insurance

There are three different types of life insurance that you can purchase to pay off a mortgage in case a spouse dies. Mortgage life insurance pays the mortgage lender off directly should you die. The other two types are term life and whole life insurance. Which type you purchase to protect you against a large mortgage balance depends on your personal situation.

Mortgage Life Insurance

Many times you will be offered mortgage life insurance when you sign your mortgage note. It is often presented as a way to protect the members of the household if an income earner dies. If you are not offered it then, you probably will receive at least one letter with a mortgage statement offering this protection. Mortgage life insurance is a decreasing term coverage, meaning the value of the policy lowers as you pay off the mortgage. This type of insurance is generally offered without any type of physical exam or health questions.

Whole Life Insurance

Whole life, or permanent insurance, features both life insurance and an investment component. You pay a monthly premium divided between the two different areas. Over time, the investment portion of the policy grows in value and can be withdrawn. You may also borrow money against the policy if you need to. Whole life is usually the most expensive type of life insurance, but many people find value in the investment component of the coverage.

Term Life Insurance

Term life is also called pure life insurance. It does not contain an investment component. You pay the amount of the premium, and the insurance company promises to pay the face value of the policy to your beneficiary if you die during the term of the policy. Term life insurance is fairly inexpensive, and because of this low price many families find this to be the best way to pay off the mortgage if an income-producing spouse dies.

Considerations

Consider your entire financial situation before purchasing life insurance. Think about other hardships in your family that would occur if an income earner was to die. A general rule of thumb is to purchase life insurance equal to 10 times the amount of the income that would be lost. You could invest this life insurance payout and earn income to offset the loss. This may be a better solution than just paying off the mortgage. If you are in poor health, the lack of a required physical exam makes mortgage insurance possibly the only option.

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