Do You Need Life Insurance If You Already Have Home Insurance?

home insurance and life insurance

Key Takeaways:

  • Home insurance and life insurance are two different types of coverage; life insurance protects your family in the event that you pass away unexpectedly, and home insurance protects your home from unexpected damage. 
  • Your need for these policies will depend on your specific circumstances, but they are not interchangeable. You can’t assume that you don’t need one if you have the other – most homeowners need both!
  • New homeowners can discover how much life insurance coverage they need with our Needs Assessment Tool and save 50% or more compared to traditional term life plans when they purchase a dynamic policy from Everyday Life!

The world of insurance can be complex and confusing, and many people are uninsured – lacking the necessary amount of auto insurance, life insurance, health insurance, and more – simply because they don’t know what types of coverage they need or how much coverage they need to protect different areas of their lives. 

One of the most common questions that people have regarding insurance is whether or not they need life insurance if they already have a home insurance policy. Everyone’s life is different, and the answer to that question will depend on your individual situation. Generally, though, people who have home insurance still need to buy a separate life insurance plan because home insurance and life insurance don’t do the same thing.

What’s the difference between home insurance and life insurance?

Home insurance and life insurance plans have different purposes, different benefits, and more – they are almost completely unrelated, and it’s important to understand what these policies do before you purchase either or both. 

A homeowner’s insurance policy is designed to cover the costs of any accidental/ unforeseeable damage to your home and minimize your personal liability. In the event that a fire destroys part of your home, for example, or someone breaks in and leaves the door and windows smashed, or a tree falls through your roof during a storm, your homeowner’s policy would pay for the cost of repairing or replacing your home after your claim is approved. Most standard policies will cover your possessions and any outbuildings (fences, sheds, etc.).  If a visitor is injured on your property, and you find yourself involved in a lawsuit, your homeowner’s policy will cover those legal costs as well. 

This type of insurance may not cover flooding or earthquakes, swimming pool damage and liability, jewelry, or artwork, among other things; it’s very important to understand what the policy does and does not insure when purchasing this type of coverage so that you aren’t caught by surprise when something does happen to your home and you find out that the damage isn’t going to be paid for. 

Homeowner’s insurance isn’t mandatory according to state laws, but if you take out a mortgage, the bank can legally require that you provide proof of homeowner’s insurance before allowing you to close on the property. Even if you pay off your mortgage, or buy your home with cash, it’s still smart to protect the largest financial asset you own from the possibility of disaster with a policy. 

A life insurance policy is designed to cover the costs of your death – to replace the value of the income and support you provided for your dependents, as well as other expenses related to your passing. There are two main types of life insurance. Term life insurance policies only last for a set number of years and protect your family against your unexpected passing, while permanent (whole) life policies do not expire and protect your family whenever you pass away. If you die and have either of these policies, a death benefit – the coverage amount you are paying for – is paid out to your beneficiaries, to be used for whatever they need. 

Home insurance protects the homeowner; life insurance protects the policy holder’s dependents. 

Home insurance is typically paid annually; life insurance is usually paid via a monthly premium. 

Home insurance claims can be paid out whenever damage occurs, and as such can be paid out many times as long as the house is still owned and the payments are still made; life insurance benefits are not paid out unless the policy owner passes away, and as such can only be used once.

Home insurance benefits can only be used to repair or replace the property; life insurance benefits can be used at the discretion of the recipients. 

Do you need both policies? 

It depends. Many new homeowners make the mistake of assuming that because their home is insured, they don’t need life insurance, but this is likely false.

Here’s a generally reliable rule of thumb: if you have a home, you need home insurance, and if you have dependents, you need life insurance. If you’re a homeowner, but you are single, you may not need life insurance coverage, but if you have both a home and dependents – i.e., you have a spouse who depends on your half of the income to pay the mortgage, or you have young children who live with you at home – then it is wise to have both types of coverage in order to guarantee protection. 

Homeowner’s insurance does not cover death – only damage to the home. If you pass away with a mortgage and dependents, but no life insurance coverage, then your dependents will be left in a tough financial situation, with all of the mortgage debt left behind. They will no longer have your income to make the house payments, which means they face moving, or foreclosure, or intense financial hardship (or perhaps all three). That’s why you may need home insurance and life insurance!

The costs of life insurance for new homeowners

Buying a home is an extremely expensive undertaking, especially in today’s hot real estate market. Even if they realize that life insurance is something they need, many new homeowners feel like they may not be able to afford both home insurance and life insurance at the same time; home insurance is the more pressing and more exciting need, so more people opt for that policy. An estimated 95% of American homeowners have home insurance, while only 54% of Americans have life insurance

Everyday Life has set out to make term life insurance logical and affordable for new homeowners! Our Needs Assessment Tool takes into account your unique life factors to help you determine the minimum amount of life insurance coverage you need, and then recommends a dynamic policy that will automatically adjust that coverage over time. We ensure that homeowners are never paying for more life insurance coverage than they need at any point over the life of their policy! 

For example, imagine that you and your spouse have two little kids and just closed on your first home. Right now, you’ll need a lot of life insurance coverage, because if anything happens to you, the burden of the mortgage debt on your family will be high, and your kids will need to be provided for until they can become financially independent. However, in 10 years, you’ll have paid off a chunk of that mortgage, and your kids will be closer to moving out. In 10 more years, you’ll have even less mortgage debt and your kids may be living on their own; you won’t need as much insurance, because if you pass away unexpectedly, the financial burden of your death will be significantly less heavy. It doesn’t make sense that most life insurance companies offer a single, unchanging rate of coverage and make you overpay! We fixed that problem by reducing your coverage and premiums over time. Our smart term life plans can save homeowners 50% or more compared to typical, static term life plans, so you can spend more money on enjoying your life and your home and less money insuring it. 

Learn more about how our unique plans work and take our Needs Assessment today to start saving!

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