How Much Life Insurance Coverage Should You Have?
September is Life Insurance Awareness Month, so now is a great time to review your insurance needs, and make sure you are adequately covered.
According to a recent study from InsuranceQuotes, nearly 40 percent of those surveyed don’t have life insurance protection. Among those without insurance, more than half said they don’t feel like they need it.1 However, even those who have insurance may not have the correct amount.
Life insurance is a critical financial tool because it protects your loved ones from financial risk associated with your death. Many people use life insurance to cover final expenses, to pay off debt or simply to provide financial relief during a difficult time.
If you don’t have life insurance protection, or if you haven’t reviewed your coverage in a long time, now is a great time to do so. If you have insufficient coverage, your family members could face a significant financial burden if you pass away unexpectedly.
Not sure how much coverage you need? Below are a few items to consider. You should also meet with a financial professional to help you develop an appropriate life insurance protection strategy specifically for your needs and goals.
What expenses will your loved ones face after you pass away?
When used properly, life insurance can be a powerful tool for helping you to accumulate cash value for your retirement years or to fund other objectives. However, the first and foremost goal of life insurance is to be used as a protection vehicle. It provides a tax-free lump-sum amount to your beneficiaries after you pass away. They can use that benefit to cover whatever expenses or financial challenges they may face after your death.
Think about costs that may arise if you were to unexpectedly pass away. There may be final expenses, medical bills and more. If you’re the primary breadwinner in the household, your family may struggle without your income. Consider providing enough life insurance to help them through a transitional period. Some people also earmark enough life insurance to pay off debt, mortgages and other bills such as college costs for your children or grandchildren (see below).
Do you want to leave a legacy for your kids, spouse, or other loved ones?
You may want to use your life insurance policy to help your family accomplish their biggest goals. For instance, maybe you’d like to provide enough funding for your children’s education. Perhaps you want to leave enough money so your spouse can retire comfortably. Maybe you want to leave assets for other important loved ones, such as siblings or parents.
Life insurance can be a great tool to help you leave a lasting and impactful legacy. As you determine your death benefit, be sure to consider ways in which you can help your loved ones improve their financial future.
Do you make other contributions to the family besides money?
Life insurance isn’t just for the breadwinner of the family. Even if you earn less than your spouse or don’t earn income from an outside job, you still may need life insurance protection. You probably contribute to the household in other ways. For instance, you may care for children or manage the home.
If you pass away, your surviving spouse may need to hire someone to replace your contributions. Child care can be costly, as can home maintenance and other similar services. Estimate the replacement cost of your contributions and use that as a basis for determining your life insurance amount.
Ready to implement an appropriate life insurance strategy for you? Let’s talk about it! Contact us today for a FREE strategy session. We can help you analyze your needs and develop a plan that will meet your needs, wants, and goals!
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