Buying your first home is a big deal. It can be a long process, but the moment those keys are placed in your hand, the new homeowner realness sets in. While paying a mortgage may not feel all that different from paying rent (both result in a big chunk of money disappearing from your bank account at the beginning of the month, right?), knowing that your money’s going toward something that’s actually yours is a pretty awesome feeling.
However, with great awesomeness comes great responsibility. First and last month rent and a deposit for a one year lease may feel like a big commitment…until you’re on the hook for a 30-year home loan. Calling the landlord when the heat goes out may be annoying…but when you’re wrapped up in your electric blanket and dipping into your vacation funds to buy a new furnace, you might miss the days of making a phone call and waiting for someone else to fix everything.
While you’re on a roll with the whole adulting thing, let’s talk about insurance. Not just homeowner’s insurance (which is typically mandatory if you’re working with a lender), but also life insurance. Because here’s the thing…the more financial obligations you have, the more you financial obligations you leave behind if something tragic happens. So pop the champagne, make an IKEA run, and paint that guest bathroom any dang color you want. But while you’re at it, consider shopping for life insurance coverage. No assembly required, we promise!
Milestones and memories
Aside from possible student loans, home ownership is one of the first big financial milestones for many of us. Even if you buy a house on your own (and may we be the first to say, “Heck yeah, girl!”), there’s always a chance you may add a partner and/or child(ren) to the mix at some point before it’s paid off (because you know, 30 years is a long time).
As you’re unpacking boxes, hanging window treatments and dreaming of all the memories you’ll make in your new home, the last thing you probably want to think about is not being around to make every last one of them. But chances are, those memories will be shared with people you love. If something were to happen to you, would your partner be able to keep up with mortgage payments? Or would your family be at risk of losing the house they call home on top of the devastating loss they’ve already suffered?
As if losing a loved one wasn’t terrible enough, the financial urgency attached to end-of-life arrangements can create even more stress. Remember how much time passed between making an offer on your house and moving the first box in? Selling a home (or even refinancing it) can take a long time, while life insurance benefits are typically paid out quickly enough to help cover those immediate expenses.
Life insurance may help not only help cover the cost of your funeral (which, at an average of $8,000-10,000, can be a pretty big financial setback for many families), but also bring some ease to a difficult time. And ideally, it could replace some of the income that allows your family to live the life you’ve worked hard to build for them.
So exactly how much life insurance does a homeowner need? There are a lot of factors that may affect that (lifestyle, number of children, etc.), but a good rule of thumb is to buy coverage that includes the value of your mortgage (basically the same rule you use to buy accent pillows...except the stakes are a little higher).
So if the value of your home is $350K, and you have a 30-year mortgage, your life insurance policy should include that amount and term length (depending on your overall coverage needs). That way, even if something terrible happened to you tomorrow, your family’s home may be protected.
A realistic list
A quick scroll through any real estate app will show you that every home has a price tag. That price may end up being a little higher or a little lower depending on how many buyers are interested in the property and how motivated the owner is to sell, but whatever you end up paying, that number is only part of the story.
Once your offer is accepted, there are other expenses you may need to plan for, possibly including (but not limited to):
Closing costs - Assorted third-party fees paid off when you close on your home.
Property taxes - The taxes you pay on your property (obviously). You can get an estimate here, but keep in mind that tax rates are subject to change as property value rises and falls.
Homeowner’s insurance - This isn’t a legal requirement, but as mentioned above, most mortgage lenders require you to purchase it…so unless you have the funds to pay for your house up front, plan on buying homeowner’s insurance. If you’re buying in an area that’s at high risk of flooding, earthquakes, etc., you may also need hazard insurance.
HOA fees - If the property you’re buying is managed by a homeowners’ association, make sure you’re clear on what the monthly fees will be on top of your mortgage payment.
Utilities - If you’re used to living in an apartment building, the first utility bill you get for your new home could be a bit of a shock. Your real estate agent should be able to help you procure an estimate of the monthly utility costs before you commit to a property.
Home Repairs/Improvements - Depending on the condition of the house you buy, you may be looking at some up-front expenses such as new kitchen appliances, a new HVAC system, new windows, new carpet, etc. These things can all add up, so plan accordingly!
Why now, though?
So why would we point out this long list of expenses, then suggest you add to it by purchasing life insurance? Well, the way we see it, when you’re already in the midst of renovating your budget (and maybe your kitchen), you might as well get everything out of the way at once.
And here’s the good news: compared to all those other things, life insurance may be a relatively minor expense! At Our Life Covered, $250,000 worth of term life insurance may cost as little as $13/month*. That’s like your Netflix subscription…or half the gym membership you may or may not use to its full potential.
Ready to get the key to your new life insurance policy? OK, it’s not an actual key, but this no-obligation quote could unlock some serious peace of mind!
When you’re ready, you can connect with our insurance agents via phone (888-828-9760), text (636-590-7416), email or live chat.
*Rates may vary, this is an example