Why you Need Life Insurance while Buying a House
To be honest, when a couple buys their first home, they usually need to take out a mortgage and that is usually the time when they realize that they need a life insurance.
It is a common scenario that people never think of buying a life insurance when they are dating or even when they have moved in together. But the truth is that even when both are earning well and decide to split the bills and expenses, the bigger needs aren’t taken care of.
But, when life happens, the need for insurance becomes self-evident.
Why do I need to buy life insurance?
We start to think about life insurance, when you get married and then liabilities come; when you buy a house; when you have kids; when you need a bigger car; or even a bigger home.
Most people are not prepared for this situation in life. As they depend on the income for living expenses and paying the mortgage as well, the importance of life insurance kicks in. When you have liabilities and something happens to one of you, the insurance reimburses the survivor with a tax-free lump sum that will help the survivor pay off the remaining mortgage. It is certainly a tough decision, we you see yourself growing and it eventually comes off as the most important thing to do.
Some employers do provide you group life insurance as part of your package, which is only an added benefit because if you leave the company, it will automatically end and you will not be offered any benefits any longer.
What Type of Life Insurance should One Go for?
If you are in Canada, you will be offered with three types of policies: term, permanent and universal. Let me give you a brief introduction to all three.
- Term Life Insurance: This is the basic low-cost policy, when you don’t have that much money, and your financial obligations (you have young children in your family or a mortgage you need to pay) are heavy. You choose term life insurance for a certain time period until your mortgage is paid. If you want, you can renew the policy when it ends. You can not change it when you decide the amount of your insurance. After 5, 10 and 20 years your premium will be increased as you get older. There is no cash value accumulated by this policy.
- Permanent Life insurance: As compared to term insurance, this provides you surety for life and it’s a rather cost-effective financial choice for longer term. You don’t have to renew it like term insurance. You cannot change the insurance amount like term policy. However, if you are young, your premiums will be higher and when you get older these will be lower. If you decide to cancel the policy, it generally accumulates a cash value and will be paid to you.
- Universal Life Insurance: Similar to permanent, Universal life insurance covers you for your lifetime but provides you much more flexibility in your policy. Depending upon your policy, your premiums can increase yearly or do not change throughout your life. One of the great benefits of this policy is that if you pay more than the cost of your policy, this extra money will be invested and increased tax deferred.
There is one more type of life insurance called mortgage protection insurance, this is a combination of term life insurance and critical illness insurance which can protect your family when you fall sick for a long time or even after your death.
I would recommend that everyone should learn about all the types of insurance and before making a decision. You need to discuss it with an insurance advisor who you can trust.
Do you have any related query? Let us know, one of our experts would love to tell you all the options you can have and make you choose a plan which can be beneficial to you and your family.