Are you in the market for life insurance but feeling overwhelmed by the various options available? Look no further!
In this article, we’ll explain the different types of life insurance policies in detail. You’ll also learn how to assess your needs so that you can make an informed decision on choosing a policy.
We will also discuss important factors to consider when evaluating life insurance riders and offer helpful tips for navigating the underwriting process.
What this article will teach you
- Understand the types of life insurance, including term, whole, and universal, to make informed decisions about coverage options.
- Evaluate personal factors like financial obligations, health, and dependents when choosing the right life insurance policy.
- Compare insurance companies based on policy offerings, customer service, financial stability, and premium rates for the best choice.
- Enhance coverage with optional riders that offer additional benefits and customization tailored to individual needs.
- Learn to calculate life insurance needs by considering financial responsibilities, income replacement, and existing resources.
Understanding Life Insurance
Life insurance is a contract between you and an insurance company, where you pay regularly scheduled premiums in exchange for a death benefit that is paid out to your beneficiaries upon your death.
Its main purpose aims to provide a financial safety net to protect your loved ones in the unfortunate event of death. For most families, it serves a dual purpose: providing a death benefit to your beneficiaries and replacing your income in the event of your untimely passing.
There are three main types of life insurance policies available including:
- Term life insurance
- Whole life insurance
- Universal life insurance
Each policy caters to individual needs and goals. As you explore your options, it’s essential to understand the differences between these policies and how they can impact your financial plans and your loved ones’ future.
| Feature | Term Life Insurance | Whole Life Insurance | Universal Life Insurance |
|---|---|---|---|
| Coverage Period: | Specific term (e.g., 10, 20, 30 years) | Lifelong | Lifelong |
| Death Benefit: | Paid if the insured dies during the term | Guaranteed | Guaranteed |
| Premiums: | Lower initially, may increase at renewal | Fixed and higher | Flexible |
| Cash Value: | No cash value accumulation | Builds cash value | Builds cash value |
| Dividends (If applicable): | Not applicable | Eligible for dividends | Not applicable |
| Premium Flexibility: | Fixed premium for the term | Fixed premium for life | Flexible premium payments |
| Payout at Policy Maturity: | Not applicable | Guaranteed payout at maturity | Not applicable |
| Suitable for: | Temporary needs, cost-effective | Permanent needs, estate planning | Customizable coverage and flexible premiums |
Term Life Insurance
Term life insurance offers coverage for a period of 10, 15, 20, or 30 years. It is the most affordable type of life insurance, making it an attractive option for those seeking temporary protection for specific financial needs or obligations.
How the coverage works is simple, if the policyholder passes away during the policy term period, the death benefit is paid tax-free to the beneficiaries. However, once the term period expires, the policy generally terminates.
Sometimes, depending on the terms of the coverage, a policy can be renewed or converted into permanent coverage after the initial term duration has ended. This allows individuals to extend their coverage or make changes as needed.
Benefits of Term Life Insurance
Affordability: Term life insurance offers several benefits, making it an attractive option for many individuals and families. One of the key advantages is its affordability compared to any other type of life insurance policy. Term life insurance premiums are typically lower because they only provide coverage for a specific period, which is why the insurance coverage is referred to as temporary life insurance. This also means you can secure a significant amount of coverage relatively cheaply, making it more accessible for those on a budget.
Simplicity and Transparency: Besides being affordable, term life insurance offers simplicity and transparency in its coverage. Unlike other types of life insurance policies, such as whole life or universal life, term life insurance is straightforward to understand. The policyholder pays regular premiums, and their beneficiaries receive a predetermined death benefit in the event of their death during the term. This simplicity makes it easier for individuals to make informed decisions about their coverage without getting overwhelmed by complicated policy details.
Flexible Coverage Length: Term life insurance policies also offer some flexibility in terms of the length of coverage. You can choose a term period that aligns with your needs and financial goals. For example, if you have a mortgage or other debts requiring time to pay off, you can select a term length that matches the duration of those financial obligations. This tailored approach allows you to address specific needs without paying for coverage beyond necessary.
Income Replacement: Another significant benefit of term life insurance is its ability to provide income replacement which is one of the main reasons younger families will choose a term policy over any other type of policy. If you are the primary breadwinner in your family, term life insurance can help ensure that your loved ones are financially protected in the event of your passing. The death benefit can replace your lost income, allowing your family to maintain their standard of living, pay bills, and cover expenses even in your absence.
No Investment Risk: Additionally, term life insurance carries no investment risk. Unlike other types of life insurance policies that may have a cash value component, term life insurance focuses solely on providing death benefit protection. This means that you don’t have to worry about the performance of any underlying investments affecting the value of your policy. It offers straightforward and reliable coverage without any investment-related complications. Term life insurance has no cash value potential.
Conversion Option: Many term life insurance policies offer a conversion option. This feature allows you to convert your existing term policy into a permanent life insurance policy, such as whole life or universal life, at a later date without undergoing additional medical underwriting. This flexibility can be beneficial if your circumstances change and you decide you want or need a more permanent life insurance solution in the future.
Lastly, term life insurance can serve as supplemental coverage to employer-provided plans. While many employers offer life insurance as part of their benefits package, this coverage might be insufficient to protect your loved ones fully. By purchasing a term life insurance policy, you can supplement your employer’s coverage and ensure that your family’s financial needs are adequately met.
Drawbacks of Term Life Insurance
Limited Coverage Period: While popular for its affordability and simplicity, term life insurance has some drawbacks that individuals should consider before purchasing a policy. One of the main limitations of term life insurance is its limited coverage period.
Unlike permanent life insurance policies, term life insurance only provides coverage for a specified period, typically ranging from 10 to 30 years. Longer-term durations are typically not available to older individuals. Plus, once the term ends, the policy generally expires, leaving the insured without any coverage. This can be problematic for individuals needing insurance protection beyond the term period, such as those with dependents or outstanding debts.
No Cash Accumulation: Another drawback of term life insurance is the lack of cash accumulation. Unlike whole life or universal life insurance policies, term life insurance has no savings or investment component. This means that policyholders do not have the opportunity to build cash value over time. While this may not be a concern for those solely seeking insurance coverage, it is worth noting that term life insurance does not offer any potential for financial growth or the ability to borrow against the policy’s value.
Premium Increases: Term life insurance policies have a fixed premium that lasts throughout the term period. However, when the term duration ends, the policy can often become an annual renewable term insurance policy. At that point, the premiums will increase significantly should the policyholder choose to keep paying on an expired term policy. This can make the coverage unaffordable for some individuals, especially those who may have developed health conditions over the years.
Lack of Investment Component: Term life insurance lacks an investment component. While this may be advantageous for some who prefer to keep their insurance and investments separate, it also means that policyholders do not benefit from any potential market gains. Unlike permanent life insurance policies, term life insurance does not offer the opportunity to earn dividends or have a cash value that can be used later in life.
Possibility of Outliving Coverage: One potential drawback individuals often worry about is outliving the coverage. If the insured survives the entire term period, the policy expires, and the policyholder has no payout or benefit. This can be seen as a wasted investment if the insured does not pass away during the term.
Health Impact on Renewal: Lastly, it’s important to note that health changes can significantly impact a new policy’s renewal or conversion options. If the insured’s health deteriorates during the term, they may face difficulty obtaining a new policy once the term expires. This can leave them without coverage or force them to pay substantially higher premiums due to the increased risk associated with their health condition.
Whole Life Insurance
Whole life insurance covers your entire life, so you don’t have to worry about losing your policy as you age or develop health issues. Knowing that your loved ones will be protected financially after you’re gone provides peace of mind when choosing this type of life insurance coverage.
Another popular feature of whole life insurance is the guaranteed cash value component that accumulates over time. As you pay your premiums, a portion of that money goes into a savings account within the policy. This cash value can be accessed during your lifetime through loans or withdrawals, providing you with a source of emergency funds or supplementing your retirement income.
It is a popular choice for those seeking a straightforward permanent life insurance policy and willing to pay higher premiums.
- Additional Resources:
- Best Dividend Paying Whole Life Insurance Companies - 2023 Edition
Benefits of Whole Life Insurance
Lifelong Coverage: Whole life insurance offers several benefits, making it an attractive option for individuals seeking permanent protection and financial security. One of the key advantages of whole life insurance is its ability to provide lifelong coverage, ensuring that your loved ones will be financially protected no matter when you pass away.
Unlike term life insurance, which only covers a specified period, whole life insurance provides permanent protection. As long as you continue paying your premiums, your policy will remain in force, and your beneficiaries will receive the death benefit when you die. This offers peace of mind, eliminating concerns about outliving your coverage and providing lasting financial security for your loved ones.
Fixed Premiums: Another benefit of whole life insurance is the fixed premiums. The premiums for a whole life policy are established when the policy is issued and are guaranteed to remain the same throughout the policy’s life. This can be advantageous as it allows you to plan your budget effectively, knowing your premiums will not increase over time.
Cash Value Accumulation: Whole life insurance policies accumulate guaranteed cash value over time. A pre-determined portion of the premiums paid goes into a cash value account, which grows on a tax-deferred basis. This means that the cash value grows without being subject to income taxes, providing a valuable savings component to the policy. The guaranteed cash value growth ensures that your policy will have a cash value you can access if needed through a loan or withdrawal.
Guaranteed Death Benefit: Whole life insurance guarantees a death benefit to your beneficiaries, provided the insurance coverage doesn’t lapse due to any missed premium payments. Upon your passing, your beneficiaries will receive a predetermined sum of money, known as the death benefit. This benefit is generally income tax-free and can support your loved ones during a difficult time, covering funeral expenses and outstanding debts or ensuring their ongoing financial stability.
Dividend Potential: Some whole life insurance policies may also pay dividends. Dividends represent a share of the insurance company’s profits and are typically paid to participating policyholders. These dividends can be used in various ways, such as purchasing additional coverage, reducing premiums, or accumulating additional cash value.
Drawbacks of Whole Life Insurance
Higher Premiums: One of the main drawbacks of whole life insurance is the high premiums. For example, it is not uncommon for whole life insurance premiums to cost 5 to 15 times more than a term insurance policy with a comparable death benefit. This can be a burden for individuals on a tight budget or for those who are unable to commit to higher premium payments.
Limited Investment Growth: Another drawback is the limited investment growth associated with whole life insurance. While whole life policies have a cash value component that earns interest over time, the growth is often slow compared to other investment options. This means that individuals looking for significant investment growth may find better opportunities elsewhere.
Complexity: Furthermore, whole life insurance can be complex and difficult to understand. The combination of insurance and investment components can make it challenging for policyholders to comprehend their policies’ terms and conditions fully. This complexity may lead to confusion or misunderstandings, negatively affecting policyholders.
Limited Flexibility: Whole life insurance offers limited flexibility compared to other options. Policyholders may find it difficult to change their policies or adjust their coverage according to their changing needs. This lack of flexibility can be restrictive for individuals who require more adaptable insurance solutions.
Protection Focus: Lastly, it is important to note that whole life insurance primarily focuses on protection rather than investment. While whole life insurance does provide an investment component, the insurance aspect tends to overshadow the investment component. Therefore, individuals who primarily seek insurance coverage may find more cost-effective options in other types of life insurance.
Universal Life Insurance
Universal life insurance is a permanent life insurance alternative to whole life insurance. Where whole life insurance has a strict structure that must be followed for the coverage to work, universal life insurance offers flexibility within the coverage.
It allows policyholders to adjust their premiums and death benefit, making it an appealing choice for those who desire more control over their policy and the potential for increased cash value expansion.
Universal life insurance policies are often indexed or variable, providing additional options for cash value growth based on market performance.
Benefits of Universal Life Insurance
Lifelong Coverage: One of the most significant benefits of universal life insurance is its lifetime coverage. Unlike term life insurance policies that only provide coverage for a specific period, universal life insurance is designed to provide coverage for the entire lifetime of the insured individual as long as premiums are paid. This ensures that loved ones are financially protected even when the policyholder dies later in life.
Flexible Premiums: Unlike other types of life insurance policies, universal life insurance is the one type of coverage that allows policyholders to adjust their premium payments according to their financial situation. This means that individuals can increase or decrease their premiums as needed, providing them with financial flexibility and the ability to adapt their coverage to changing circumstances.
Cash Value Growth: Another advantage of universal life insurance is the cash value accumulation feature. With universal life insurance, a portion of the premiums the policyholder pays is allocated to a cash value account. This cash value grows based on an interest rate declared by the insurance company. The policyholder can also access this cash value through policy loans and withdrawals, providing a source of funds that can be used for various purposes such as emergencies, education expenses, or supplementing retirement income.
Adjustable Death Benefit: Universal life insurance also provides an adjustable death benefit, which can be beneficial in certain situations. This feature allows policyholders to decrease the death benefit amount to meet their changing needs. For example, if the policyholder’s financial obligations decrease over time, they may choose to reduce the death benefit, thereby lowering their premiums.
Tax-Deferred Growth: Another advantage of universal life insurance is its tax advantages. The cash value accumulation within the policy grows on a tax-deferred basis. This means that policyholders do not have to pay taxes on the cash value growth until they withdraw or borrow from it. Additionally, the death benefit paid out to beneficiaries is typically tax-free, providing a significant advantage for estate planning purposes.
Investment Options: Universal life insurance can be a valuable tool for estate planning. The death benefit received by beneficiaries can help cover estate taxes, debts, and other financial obligations, ensuring that these expenses do not burden the policyholder’s loved ones. Furthermore, the cash value within the policy can be used to fund trusts and provide additional financial security for future generations.
Universal life insurance also offers living benefits, which can be accessed during the policyholder’s lifetime if certain conditions are met. These benefits can include accelerated death benefits, allowing the policyholder to receive a portion of the death benefit if diagnosed with a terminal illness. This can provide financial support for medical expenses and help ease the burden on the policyholder and their family.
Lastly, universal life insurance can serve as a supplemental retirement income source. As the cash value within the policy accumulates over time, it can be utilized to supplement retirement income. Policyholders can withdraw funds or take out policy loans to supplement their retirement savings, providing an additional source of income during their golden years.
Drawbacks of Universal Life Insurance
Complexity: Universal life insurance, despite having its merits, also comes with certain drawbacks that potential policyholders should be aware of. One of the main drawbacks is the complexity of this type of insurance. Unlike term life insurance, which is relatively straightforward, universal life insurance involves many moving parts and can be challenging to comprehend fully.
Premium Fluctuations: Another drawback is the variable premiums that policyholders may face. Unlike whole life insurance, where premiums remain fixed throughout the policy’s duration, universal life insurance premiums can fluctuate. These fluctuations often depend on interest rates, investment performance, and mortality costs. This unpredictability can make it challenging for policyholders to budget and plan for their insurance expenses.
Market Risks: A certain level of cash value risk is involved in universal life insurance. The cash value component of the policy is subject to market volatility. If the underlying investments perform poorly, the cash value may not grow as anticipated, potentially leaving policyholders with lower cash value than expected.
Surrender Charges: Surrender charges are another drawback of universal life insurance. These charges can be imposed if policyholders decide to terminate their policies before a certain period of time has passed. Surrender charges can significantly reduce the cash value available to the policyholder upon cancellation.
Costly Premiums: Furthermore, universal life insurance has the potential for premium increases. As mentioned earlier, premiums can be variable, and in some instances, policyholders may face unexpected premium hikes. This can strain their finances, especially if they reach their senior years and are unprepared for such an increase.
Lapse Risk: Lapse risks are also a concern with universal life insurance. If policyholders fail to pay sufficient premiums, their policies may lapse, resulting in a loss of coverage and potential forfeiture of any accumulated cash value.
Limited Guarantee: Interest rate changes can pose another challenge for universal life insurance policyholders. Since these policies often have a cash value component linked to interest rates, a decline in interest rates can adversely affect the growth of the cash value. This can impact the overall effectiveness of the policy and the potential benefits it can provide.
Universal life insurance may not always align perfectly with an individual’s financial goals. Due to its complexity and potential for variable premiums and cash value risk, this type of insurance may not be the best fit for everyone. It requires careful consideration and understanding of the policy’s terms and features to ensure it aligns with one’s long-term financial objectives.
Factors to Consider When Choosing Life Insurance
When deciding on a policy, it’s critical to consider several factors, such as your financial obligations, your health condition, and your family’s needs. It’s not one-size-fits-all. Your life insurance should reflect your individual circumstances.
You’ve got to think about your income and debts, for starters. If you’re the primary breadwinner, you’d want a policy that could replace your income for a few years. Got a mortgage or other large debts? You’ll need enough coverage to clear those.
Your age and health are also crucial. A younger, healthier person often gets lower premiums. If you’re older or have health issues, you may want to look into policies that don’t require a medical exam, though they tend to cost more.
Consider your dependents too. If you have young children or others who rely on your income, you’ll need a policy that provides for them during your death.
Lastly, policy features should also be evaluated. Some policies offer additional benefits, such as cash value accumulation or converting term insurance into permanent insurance without a medical exam. Understanding the policy features will help you choose a policy that aligns with your needs and goals.
Choosing life insurance is a big decision. Consider all these factors to find the right policy for you.
Comparing Life Insurance Companies
It’s essential to compare different providers before you settle on one for your coverage needs. Not all life insurance companies are created equal. They vary in terms of policy offerings, customer service, financial stability, and premium rates. You’ve got to consider all these factors to make an informed decision.
Start by comparing the policies each company offers. Look at the types of life insurance available, the coverage amounts, and the flexibility of the terms. You want a policy that suits your needs and budget.
Next, evaluate the company’s customer service. Check out online reviews, ask for referrals, and contact their customer service department. You’ll want a provider that’s responsive and helpful.
Consider the company’s financial stability. Check their ratings from independent rating agencies like AM Best or Standard & Poor’s. You’re looking for a company that’ll be around in the long run.
Lastly, compare the premium rates. Remember, cheaper isn’t always better. But you also don’t want to be overpaying for coverage. It’s a delicate balance. Take your time, do your research, and choose wisely.
- Additional Resources:
- 2023 List of Life Insurance Company Ratings
Evaluating Life Insurance Riders
Life insurance riders are additional features that can be added to a life insurance policy to enhance its coverage and customize it to meet specific needs. Here are some common types of life insurance riders:
Accelerated Death Benefit Rider: This rider allows the policyholder to receive a portion of the death benefit if they are diagnosed with a terminal illness or have a short life expectancy. This can help cover medical expenses or other costs during the policyholder’s lifetime.
Disability Income Rider: This rider provides a regular income to the policyholder if they become disabled and cannot work. It ensures that the policyholder can maintain their standard of living despite the loss of income.
Waiver of Premium Rider: With this rider, if the policyholder becomes disabled and is unable to work, the insurance company waives the premiums for the policy. This ensures the policy remains in force even if the policyholder cannot afford to pay the premiums.
Accidental Death Benefit Rider: This rider provides an additional death benefit if the policyholder dies due to an accident. It can benefit individuals who work in high-risk occupations or engage in hazardous activities.
Guaranteed Insurability Rider: This rider allows the policyholder to purchase additional coverage at specific intervals without needing a medical exam or underwriting. It ensures that the policyholder can increase their coverage as their needs change, such as after getting married or having children.
Long-Term Care Rider: This rider provides funds to cover long-term care expenses if the policyholder becomes chronically ill or needs assistance with activities of daily living. It helps protect the policyholder’s assets from being depleted by the high costs of long-term care.
Return of Premium Rider: With this rider, if the policyholder outlives the policy term, the insurance company returns the premiums paid. This can be seen as a way to “save” money with the potential for a refund at the end of the policy term.
Family Income Benefit Rider: This rider provides a regular income to the policyholder’s beneficiaries upon the insured’s death. Instead of a lump sum payment, it ensures that the beneficiaries receive a steady stream of income, which can be helpful for ongoing expenses.
By understanding and evaluating these different life insurance riders, you can choose the ones that best suit your needs and provide the desired additional coverage and benefits.
Calculating Your Life Insurance Needs
Determining how much coverage you’ll need involves considering your current financial obligations, future needs, and existing resources. You’ll want to consider your mortgage, debts, regular expenses, and any anticipated costs, such as college tuition for your children or medical expenses.
Consider also your future income needs. If you’re the primary breadwinner, how much would your family need to maintain their lifestyle if you’re no longer around? You might want to replace your income for a certain number of years or ensure enough to cover specific future expenses.
Next, examine your existing resources. What assets do you have that could be used to cover expenses? Do you have savings, investments, or other life insurance policies? Subtract these from your calculated needs to find your coverage gap.
Last, consider the cost of the policy itself. You’ll want to ensure it’s affordable for you now and in the future. Remember, life insurance is a long-term commitment.
Calculating your life insurance needs might seem daunting, but it’s crucial. You can consult with a financial advisor or use online calculators to help you. Remember, the goal is to ensure that your loved ones are financially secure and can maintain their lifestyle even after you’re gone.
Navigating Life Insurance Underwriting Methods
Navigating underwriting methods can be tricky, but they’re essential to securing the proper coverage. Underwriting in life insurance refers to how an insurance company evaluates your risk and determines the premium you’ll pay for your policy. This process considers factors like age, health, lifestyle, and occupation.
Traditional underwriting usually involves a medical exam. You’ll be asked to provide a blood and urine sample, and your medical history will be scrutinized. It’s a thorough process, but it can result in lower premiums if you’re in good health.
Simplified issue policies skip the medical exam, but you’ll still answer a health questionnaire. It’s quicker but not necessarily cheaper. You may find this method more favorable if you’ve some health issues.
Lastly, guaranteed issue policies require no medical exam or health questions. Anyone can get coverage, but it comes with higher premiums and often lower coverage limits. It’s an option if you have serious health issues or are older.
Each method has its pros and cons. By understanding these underwriting methods, you’ll be better equipped to find the right life insurance policy for you.
Tips for Buying Life Insurance
When buying life insurance, it’s important to consider your financial obligations and the coverage you need. Life insurance is designed to provide financial protection to your loved ones in the event of your death.
To make an informed decision, you should keep a few tips in mind.
Firstly, assess your financial obligations. Consider your mortgage, outstanding debts, and the needs of your dependents. This will help you determine the amount of coverage you require. Ensuring that your policy will adequately cover these financial obligations is important.
Next, consider the type of life insurance policy that suits your needs. There are two main types: term life insurance and permanent life insurance.
Term life insurance covers a specified period, while permanent life insurance covers your entire life. Each type has its advantages and disadvantages, so it’s important to understand them before deciding.
Additionally, consider the financial stability and reputation of the insurance company you’re considering. Look for a company with a strong track record and positive customer reviews.
Lastly, don’t forget to compare quotes from different insurance providers. This will help you find the best policy at the most affordable price.
Conclusion
In conclusion, understanding the different types of life insurance policies is essential in making an informed decision about your coverage options.
Term life insurance provides temporary coverage at an affordable price, while whole life insurance offers lifelong protection with a cash value component. Universal life insurance combines flexibility with a savings element.
Evaluating the available riders and calculating your specific insurance needs are crucial steps in selecting the right policy.
Remember these tips when buying life insurance to ensure you make the best choice for your future.
Frequently Asked Questions
What are the 2 main types of life insurance?
The two main types of life insurance are term and permanent. Term life provides coverage for a specified period, while permanent life offers lifelong coverage.
Can I have multiple life insurance policies at the same time?
Yes, you can have multiple life insurance policies at the same time. It’s called ‘laddering’ and can be a smart way to customize your coverage to your changing needs.
However, you need to ensure you’re not over-insured. Each company you apply to will consider your coverage before approving additional policies.
It’s always essential to consider your financial situation and personal needs before taking out multiple policies.
What is burial life insurance?
Burial insurance, or final expense insurance, is a form of whole life insurance specifically designed to cover the costs associated with a funeral and burial. It is typically a smaller policy, ranging from $5,000 to $25,000, and is meant to provide financial assistance to your loved ones during a difficult time.
One of the key advantages of burial insurance is that it is relatively easy to qualify for, even if you have pre-existing health conditions. Most burial insurance policies do not require a medical exam and have simplified underwriting processes that consist of general health questions.
Additionally, the premiums for burial insurance tend to be lower than other types of life insurance policies, making it an affordable option for many, especially seniors.
Burial insurance policies also provide a quick payout to your beneficiaries, usually within a few days of your passing. This can help your loved ones cover the immediate end-of-life expenses, such as funeral costs, without waiting for a lengthy claims process.
It’s important to note that burial insurance policies may have some limitations. The death benefit is typically fixed and may not increase over time, so it may not keep pace with inflation or changing financial needs.
Additionally, burial insurance policies may have a waiting period before the full death benefit is paid out, usually one to two years. If you pass away during this waiting period, the policy may only pay out a portion of the death benefit or return the premiums paid.
What is mortgage life insurance?
Mortgage protection insurance (MPI) is a form of term life insurance often sold to homeowners to provide financial security for their families in case of their death. MPI is intended to pay off the remaining mortgage balance if the policyholder passes away before the mortgage is fully repaid. This insurance ensures that the borrower’s loved ones can maintain the property without the burden of mortgage payments.
