Exactly How Much Life Insurance Coverage Should You Have
We all know the importance of having insurance on our automobile, in case of an accident, as well as on our home, in case of fire, theft, or storm damage. We pay premiums for health insurance coverage for ourselves and our children, so we don’t end up with huge medical bills that we can’t afford to pay. We go to all of these steps to protect our property and our health, but we often overlook protecting our families in the event of our death, by not taking out a life insurance policy. What would happen to your family if you suddenly passed away? No one wants to think about the fact that this could happen, but the reality is that it could. No matter how young or old you are, you never know exactly when your time will come. Could your spouse support your family on only one income, plus cover any debts that were left unpaid? If you don’t currently have a life insurance policy, you need to get one now, to protect your family when you can’t.
Once you have decided to take out a life insurance policy, and have chosen the policy you want, you have to decide exactly how much insurance coverage you need. It can be difficult to do, because you don’t want to end up paying high premiums forever on a large life insurance policy, but you want to be certain that your family will have enough money to cover your final expenses and at least partially replace your income. In this article, we will talk about some things that you should think about when determining exactly how much life insurance coverage you need, so that you can rest assured that if something does unexpectedly happen to you, your loved ones will be financially okay.
Most financial advisors and insurance representatives will tell you that you should at least take out enough life insurance coverage to completely replace your income for the first year of your death. But, considering that you may not pass away anytime soon, you need to adjust this based on the raises you may get, inflation, and increases in the cost of living. One of the best ways to do this is sit down with all of your current monthly debts, and come up with a tally of your total financial monthly obligations that you currently pay each month and then figure in extra money for food, gas, and an extra balloon amount to act as a cushion. That way, all of your debts will be covered, and any income your spouse brings in will be used to provide for the family until other arrangements can be made.
If you have children, you should also make certain you have enough life insurance coverage to pay for their needs until they are of age, as well as their college expenses. Your spouse will need money for clothing, checkups, and school related expenses, so you should think about that when choosing your life insurance coverage. Your children need your help with these things, whether you are actually alive and here with them or not, it is still partially your responsibility.
Rather than cover the monthly bills for a year, some people opt instead to get enough life insurance coverage to completely payoff their debt in the event of their death. So, if you choose to go this route, you should get your credit report for both you and your spouse and add up all of the outstanding balances, so that you know exactly how much money it would take to payoff all of the debts, this is the amount of life insurance coverage you will need to add in to your policy. If you add more bills, then you will need to increase your coverage over the course of the years.
When it comes to your children, you should not only think about providing for their needs and their college education, but also whether or not you want to set aside some funding for them to have at your passing, or an inheritance or trust fund. This is easy to do, simply decide how much money you want them to have when you pass, and include that amount in your life insurance policy. When you make out your will, specify how much money out of the policy is to go to the children, or set it up that way through your insurance provider, if that is an option.
So as not to burden your family with any extra debt at the time of your death, you should also include the costs of your funeral into your life insurance policy as well. With the way burial expenses are rising, you should have at least $10,000 set aside for this purpose, and may need to adjust this amount later on, as the average costs go up.
The idea is to leave your family with as much financial stability as possible, and still be able to afford your monthly life insurance premiums. The more coverage you have, the better off your loved ones will be when you pass, but you don’t want to make things financially difficult for them now to cover your life insurance premiums, so you have to find the happy medium in between. As your financial situation changes for the years, you can always add additional coverage, and you should whenever the opportunity arises.