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Top Considerations & Facts About Home and Life Insurance

By Guest Last Updated July 20, 2020 5 min read

Due to recent circumstances and the state of the world, many individuals have recognized the importance of asset protection and insurance. Rather than risking a worst-case scenario, current homeowners and potential homebuyers should be informed about the ways to best prepare for the future by creating a reliable financial situation during the home buying or selling process.

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By serving as a resource to your buyers, real estate agents and representatives can assist clients in preparing to take this large financial step and help provide them with the tools needed to feel peace of mind. 

Home Insurance Considerations: 

Homeowners insurance policies cover a variety of issues and can drastically help ease the financial burden when disasters or uncontrollable circumstances occur.

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Although a home insurance policy is meant to provide relief, it’s important to understand what type of disasters or problems your policy actually covers—as it will not account for everything. Before purchasing your next home, take some time to review the facts and gain some fresh insight to best prepare for this investment. 

Natural Disasters

As it’s understood, being proactive and planning ahead rather than responding when a crisis strikes is always a good idea when it comes to protecting your home and family. As you consider your risks based on your geographic location, it’s beneficial to learn about the different types of disaster damage coverage for your situation. When faced with a storm that produces hail, wind, fire, rain, or lightning, there is always potential for damage and destruction. Basic policies will cover personal property and home damage. However, if you live in a high-risk zone for hurricanes, you should look into specific additional coverage for wind damage for example. As you can see, your security relies on your ability to understand your risks and take precautions to address those specific needs. 

Normal Wear and Tear 

For new homeowners, it’s critical to understand that typical home maintenance and updates are your financial responsibility after purchase. Updates and home fixes that are needed in order to keep the home from deteriorating are up to you—even though it might directly impact the structure and safety of your home. Purchasing a home requires you to have the financial backing to support repairs and projects like these that will come up over time and will not be covered under your insurance. Having this knowledge and preparation ahead of time might encourage you to set aside money into an emergency fund just to cover home repairs and maintenance. 

Flooding and Water Damage 

If you’ve ever experienced water in your home, you understand that it can be stressful and damaging. With that said, it’s not necessarily a problem that will be fully covered by your insurance policy. Once again, this is another area that information and research are required based on your home’s location. If you live in a flood zone, consider purchasing additional coverage for floods and water damage. For some people, a little water during a huge storm can be taken care of on your own. For others, there might be damage and destruction that can have huge impacts on your finances and property, meaning that extra coverage would be beneficial. 

Outdoor Service Lines 

If a pipe bursts in your home, it’s likely your insurance will help cover the costs to repair or replace it. With that said, if you have issues outdoors with a fallen or broken service line, it might be your financial responsibility to get it taken care of. It’s recommended that you get a professional option but be prepared to handle the costs for this issue on your property. 

Life Insurance Considerations: 

In addition to home insurance, life insurance is just as critical to review when it’s time to purchase or sell your home.

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Your assets and payments are likely associated with your life insurance policy, and any change should be a reason to re-evaluate your life insurance policy or purchase a policy if you have yet to do so. 

Term Insurance vs. Whole Life Insurance

Understanding the difference between life insurance policies is a good idea when setting up protection for yourself and your family. A typical term life insurance policy is a common purchase that correlates with homeownership. Term life insurance is purchased as protection for a certain period of time while payments are being made. If you fall ill or pass away during the term, your beneficiary would receive your death benefit and could use that to make any necessary payments or arrangements. On the other hand, whole life insurance combines investing and insurance as you never have to worry about insurability, however—it’s more expensive and complex. It is often used to cover estate tax should the owner pass away and allow this property to remain in the hands of a beneficiary. With that said, some people end up dropping a whole life policy as the premiums could be five to 15 times the cost. 

Asset Protection and Security:  

If you are not yet well versed in life insurance benefits, this is a good time to get up to speed. When purchasing a home or making any life-impacting financial commitment (such as marriage, purchasing property, a new car, or having a child), it’s necessary to determine how payments will be made should you fall ill or pass away unexpectedly. Although you might have a plan to pay off these assets, your loved ones might not have the resources to take over these payments. By securing a life insurance policy, you can set up payments and allocate funds directly for these expenses that you have yet to own. If you intend for them to sell the property at some point, they can learn the ways to get the most for their money during the sale to get the most benefit from your legacy planning. 

Mortgage Protection Insurance: 

One consideration involving life insurance would be to determine if mortgage protection insurance is right for your situation. If you desire to help out your loved ones in the case of your unexpected passing but your health issues impact your ability to get a competitive life insurance rate, reviewing this option would be worthwhile. Although term life insurance policies tend to be more affordable and allow for more flexibility, a mortgage protection plan removes the guesswork as it’s matched up to the mortgage balance so that the right amount of money is funneled directly to the mortgage. That way, it won’t be in the beneficiary’s hands to decide how much to allocate. Discussing with an insurance professional can help you determine the best life insurance policy for your needs while taking into consideration your family’s future financial needs. It’s necessary to consider your own personal situation as there might be other bills and debts that would require payments other than just a mortgage to account for during this process. 

During the process to become a first-time homeowner or purchase any new home, attention to detail should be at the top of your list. To reduce a financial burden and future stress, a homeowner must consider the circumstances in which they might be required to cover certain expenses as it relates to their life, home, or property. Although it requires time and energy, being aware of the details can save you and your family a lot of time, money, and sanity should you be dealt with a challenging circumstance.