Differences Between Life Insurance & Property Insurance

Life insurance and property insurance are both common types of coverage, but operate in different ways and are purchased for different reasons. For instance, a lender typically requires that a borrower purchase some type of homeowners insurance before granting a loan, because it is legally required in the United States. Life insurance is not required for any loan and there is usually no requirement to buy it all. The two categories of insurance also differ on terms and payment.

Life Insurance

Life insurance is coverage designed to pay survivors in case the policyholder dies. Basic life insurance policies are often purchased so survivors have the funds to deal with the funeral and any liabilities that the policy holder had, but there are many other reasons to buy life insurance. Some policies act more like investments, providing a sum of money that increases due to a rate of return and can even be claimed by the policyholder after a set number of years, regardless of death.

Property Insurance

Property insurance is more typically known as homeowners insurance, and instead of covering a death, it covers perils that cause damage to a house the policyholder owns. These perils are unexpected accidents, and even the simplest policies cover things like fire and theft. More complex policies may cover valuables in the house, too. Some perils, like earthquakes and hurricanes, are so massive that private insurers will not cover them, but government programs are often available for these events.

Mortgage Insurance

Mortgage insurance is another type of property-related insurance that help homeowners cover their mortgage in case they can no longer make payments. The borrowers themselves are not paid by mortgage insurance: instead, the insurance company begins making payments to the lender when the borrower cannot. There is also mortgage life insurance, the place where property insurance and life insurance meet. With a mortgage life policy, if the homeowner dies, the policy makes a contribution to the mortgage, presumably enough money to pay it off entirely so the survivors will not be burdened with the loan.


Life and property insurance also differ based on terms. Life insurance tends to continue as long as policyholders make payments, renewing itself and only coming into effect when the policyholder dies. Investment life insurance policies are the exception, but even they continue for decades. Property insurance is typically paid on a yearly basis, and can offer coverage many times instead of only once, depending on what perils cause damage to a house.