This Financial Move Should Push You to Get Life Insurance

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  • Having life insurance can protect your loved ones financially in the event of your passing.
  • Any time you take on a large financial obligation with a spouse or partner, such as purchasing a home, it's important to put life insurance in place.

Don't put off life insurance once you do this.

Life insurance is one of those things many people don't think about until they undergo a life change. In some cases, getting married could spur the decision to apply for life insurance. In other cases, a given couple might put off life insurance until they have children.

The whole purpose of life insurance is to protect your loved ones financially in the event of your passing. And so if you're taking on a large financial obligation, like buying a home, with a spouse or partner, then that alone should motivate you to sign up for life insurance.

Why you need life insurance when buying a home jointly

Buying a home can be a huge undertaking. And it could also mean taking on a lot of debt in the process.

The average mortgage amount as of this writing is $433,000, according to Trading Economics. That's not a small amount of debt. And it's also the sort of debt that might require two separate salaries to keep up with.

Now, let's say you decide to buy a home jointly with your spouse, and you take out a $433,000 mortgage with the assumption that both of your incomes will be used to pay off your home over time. If one of you were to pass away, the other might struggle to keep up with those mortgage payments. And falling behind on mortgage payments could mean losing your home.

So if you're taking on a home purchase jointly, you should put life insurance in place. That way, if one of you passes away, your life insurance could be enough to cover their share of the mortgage or even, ideally, pay off your home outright.

What kind of life insurance should you get?

When it comes to buying life insurance, you have choices. You could opt for a term life insurance policy, which will cover you for a preset period of time, or you could buy whole life insurance, which covers you on a permanent basis.

Some people like the idea of perpetual coverage and opt for whole life insurance, which also offers the benefit of accumulating a cash value. But the problem with whole life insurance is that it can be very expensive -- far more expensive than a term life insurance policy. So in many cases, you'll be better off opting for term life coverage instead.

The good thing about term life insurance is that you can choose the timeframe that works for you. So, let's say you're signing a 30-year mortgage. You can buy a 30-year term life insurance policy so you're protected throughout your home's entire payoff period. And that way, you'll also have lower life insurance premiums to cover, which may be important at a time when you've also taken on the expenses of homeownership.

Of course, there are plenty of good reasons to get life insurance other than buying a home. But once you take that leap, it really pays to shop around for life insurance and put some coverage in place.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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