How Much Life Insurance Do I Really Need?
When you are asking the question 'How much life insurance do I need?' it is only you that is able to provide the exact answer. A guiding hand can provide you with the things that you need to take into consideration when you are making your calculations and that is the purpose of this article.
If you are interested in taking life insurance out it is because you know that there are people that both at present and in the future do and will rely on you financially in some way. Of course you are right now in the land of the living and paying your way to support those reliant on you financially. However what if the totally unexpected happened and you were to die tomorrow? Could these people survive without you financially? In most cases these people will be those closest to you, your family! You want them to be protected should the unexpected happen so taking out life insurance is of course the best way to do this. But now you are faced with the lingering question 'how much life insurance do I need?'.
Everybody's circumstances are different, age, relationship status, job, kids to put through school, mortgage or no mortgage. All of these are important factors to take into consideration when you plan to take out life insurance. You may already have life insurance in place but it is always wise to regularly check your life insurance needs so asking yourself 'how much life insurance do I need?' is by no means a one off question. A change in circumstances such as moving house and changing your mortgage or having a baby are reason enough to have to take out further life insurance cover.
In America insurers generally suggest that consumers apply for at least 10 times their annual income to begin with. Other things to take into consideration are primarily outstanding mortgages. If you are no longer around to pay the mortgage it is possible that your family would not only lose you but the roof over their heads as well. You want to insure that they have security in place should the unexpected happen.
If you have children then their school fees will need to be taken into consideration so that your partner is not left to struggle to get together the money to fund this later on.
The cost of your funeral will also be an immediate expense for your loved ones and the average family will not be able to afford this without insurance in place to cover it.
When you present your life insurance application you will need to justify the amount of cover that it is you are applying for so it is important that your calculations are accurate and you have means to prove that the amount is warranted.
Many people adopt the attitude that life insurance is just another expense at the end of the month but it is relatively inexpensive and the peace of mind that it can provide you and your family with is priceless! The cost will vary dependent on your individual circumstances but the important thing to bear in mind is even if you saved the amount you would set aside each month for life insurance for many many years, if the worst happened and you or your partner died, the amount you have accumulated will never cover the amount you would be able to claim through a life insurance policy. In your family's time of need they will be financially vulnerable to add to the tragic loss that has taken place. Nobody wants their family to go through the loss of a partner or parent so it is your responsibility as a provider to ensure financial security through this time.
Life insurance can also be taken out solely to cover an outstanding debt, as mentioned previously this is most commonly a mortgage. The policy can be set up so that the proceeds are specifically payable to a party that has a genuine financial interest in you and the insurer can and most likely will request that this interest is documented.