Posted on: 29 July 2020
It is important to have life insurance, but it is even more important to have an adequate amount of life insurance. If you plan to invest in a policy or you have concerns about whether or not you have enough coverage, here are just some of the factors you should consider.
1. Family Status
Whether or not you are married, have children, or have plans to is one of the first benchmarks you should consider to evaluate a policy amount. If you are single, you do not have children, or you do not any immediate plans to change this status, you do not need nearly as much insurance protection as someone who is married with children or is expecting a child soon. Remember, life insurance is intended to provide financial support for your family upon your passing, so they should be the first consideration.
2. Spouse's Earnings
If you are married, think about your spouse's earnings. More specifically, how well would your spouse be able to financially cope without your income. For example, would your spouse be able to pay the mortgage with just their income? As a general rule, the spouse that is the higher wage earner should have a higher-valued life insurance policy to help compensate for the missed income.
3. Debts vs. Assets
You should also think about your debts vs. assets, especially your shared debts. For married couples, when one spouse dies, the debt does not automatically go away. If the living spouse is listed as a co-borrower on the loan, they are still financially responsible. If you and your spouse have a high number of shared debts, but limited assets to pay off these debts in the event one of you passes, a life insurance policy that can cover a large portion of these costs is most helpful.
Life insurance policies are also valued based on age, so the younger a person is, generally, the greater the amount of life insurance they need to carry. The theory behind this thought is that the younger you are, the greater the amount of income loss your family would suffer if you were to pass, and if you have young children, the greater their financial need going forward. As you get older, you may decide to lower the value of your policy based on your family's reduced needs.
It is always a good idea to speak with an insurance service about a life insurance policy to ensure you have enough coverage to keep your family protected.Share