Life Insurance FAQs for First-Time Homebuyers (2025 Guide)

Last Updated: December 5, 2025 | Written by President of Term Life Online – AU, AAI, ARM

Top Life Insurance FAQs for First-Time Homebuyers

1. Do first-time homebuyers need life insurance?

Short answer: Yes—if someone would struggle to make the mortgage payment without you.

Life insurance is especially important if you:

• Bought a home with a spouse or partner
• Have children
• Rely on two incomes to qualify for your mortgage
• Want to avoid burdening your family with unexpected debt

Even if you don’t have dependents, affordable term coverage can protect your co-borrower or estate from financial strain.

2. What type of life insurance is best for first-time homebuyers?

Most new homeowners choose term life insurance, because it’s:

• Affordable
• Simple
• Designed to cover financial obligations for a set period

Best choice:

    ✔ 30-year term (matches the typical mortgage)
    ✔ Enough coverage to pay off your full loan + extra for living expenses

Alternative:

Mortgage protection insurance (MPI): Pays the lender, not your family, and is usually more expensive. Term life is almost always the better value.

3. How much coverage do I need to protect my home?

A simple formula for homebuyers:

• Mortgage balance
• 1–3 years of income replacement
• Any debts shared with your spouse/partner 

       = Recommended coverage amount

Example:

• $350,000 mortgage
• $80,000 annual income
• $20,000 in debts

Recommended coverage: $350K + $160K + $20K = $530,000

Round up to the nearest $50K or $100K.

4. Should both spouses or co-buyers get coverage?

Absolutely.

Even if one partner earns less, consider what they contribute:

• Childcare
• Household responsibilities
• Shared bills
• Mortgage qualification benefits

If either person passes away, the surviving partner often experiences immediate financial strain. Dual policies solve this.

5. Does my mortgage lender require life insurance?

Generally, no—lenders do not require traditional life insurance.

However, they may offer (or push) mortgage protection insurance. You are not obligated to buy it.

A personal term life policy gives you:

• Lower premiums
• More flexibility
• The ability to choose your beneficiary

6. What’s more important, life insurance or homeowners insurance?

You need both, but they serve completely different roles:

• Homeowners insurance protects the property.
• Life insurance protects the people paying for the property.

One covers the building.

The other ensures your family keeps the building if you pass away.

7. When should I buy life insurance during the home-buying process?

The best timeline:

    Step 1: Get pre-approved for your mortgage

    Step 2: Begin shopping for life insurance

    Step 3: Finalize coverage around closing day

Why? Because after closing, your debt load increases—sometimes impacting underwriting.

Starting early locks in lower rates and ensures you’re protected from day one.

8. What if I already closed on my home? Is it too late?

Not at all.

You can buy life insurance anytime, and it still protects your mortgage. Many homeowners secure coverage weeks—or even years—after moving in.

But here’s the catch:

The sooner you purchase, the lower your rate typically is.

9. How much does life insurance cost for new homebuyers?

Most first-time homebuyers are in their 20s, 30s, or early 40s—prime age for low rates.

                        Approximate monthly rates for healthy non-smokers:

                  Age           $500K / 30-Year Term     $750K / 30-Year Term

                  25                $20-$30 per month             $27-$40 per month

                  30                $22-$34 per month             $30-$45 per month

                  35                $27-$40 per month             $38-$55 per month

                  40                $36-$55 per month             $50-$75 per month

NOTE: Mortgage-level protection is usually cheaper than a single dinner out.

10. Can I get coverage without a medical exam?

Yes. Many insurers offer:

• Instant-issue term life insurance
• Accelerated underwriting
• No-exam policies

Perfect for buyers closing quickly or who want fast approval.

However, note:

No-exam policies may cost slightly more. If time allows, fully underwritten policies typically offer better rates.

11. What happens to my life insurance if I move or refinance?

Your policy stays with you, not the home.

So if you:

• Sell your home
• Buy a new property
• Refinance your mortgage

Your coverage continues uninterrupted.

That’s why term life policies are far more flexible than mortgage protection insurance.

12. Should I list my mortgage lender as a beneficiary?

No.

You should list:

• Your spouse
• Your partner
• Your children
• A trust

These beneficiaries can use the money however it best supports your family—not just to pay the mortgage.

13. What if I have a stay-at-home spouse? Do they need coverage?

Yes—and it’s often a huge oversight.

A stay-at-home partner provides economic value through childcare, transportation, and household management.

If they pass away, the surviving partner may need:

• Childcare coverage
• Additional household help
• Time off work

Life insurance for both partners ensures long-term stability.

14. Can life insurance help me qualify for a mortgage?

Indirectly, yes.

Some lenders view insured borrowers as lower financial risk, particularly if both partners carry coverage. It also strengthens your long-term financial picture.

15. What if I have health conditions? Can I still get insured?

Most health issues—diabetes, high blood pressure, high cholesterol, obesity—do not disqualify you.

Options include:

• Standard term life
• No-exam policies
• Guaranteed-issue plans (last resort)

Always compare multiple insurers. Each views health conditions differently.

Final Thoughts: Life Insurance Is the Missing Piece in Your Homeownership Plan

As a first-time homebuyer, you’ve taken a major step in building your future. But a mortgage lasts 15–30 years—much longer than most people consider when budgeting.

• Life insurance isn’t just a policy.
• It’s peace of mind.
• It’s stability for your partner.
• It’s the guarantee that your home stays where it belongs—with your family.

If you’re a new homeowner or about to become one, now is the perfect time to secure coverage that protects what you’ve worked so hard for.

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Resources:

• Learn How a Term Life Insurance Policy Works
• Tips for Buying a Term Life Insurance Policy
• 10 Life Insurance Tips for First Time Home Buyers
• Mortgage Life Insurance for First Time Home Buyers
• Calculating Your Life Insurance Needs
• A.M. Best Company: Compare financial strength ratings of life insurance companies
• Life Happens.org: Learn about life insurance and review facts.
• Investopedia: Learn more about financial planning with term life insurance.

About Our Methodology

Reviewed By: President of Term Life Online – AU, AAI, ARM

• 30+ years of experience in insurance planning

How We Keep This Guide Accurate: We regularly updates our content to reflect the latest rates and industry trends. We are committed to providing transparent, unbiased information to help you make the best decision for your family.

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