Death is a subject that many people put off talking about and planning for until they are faced with the loss of a loved one. While putting off the inevitable may be a way of coping for some, neglecting to properly plan for your family’s financial future can leave them in dire straits once you are gone.
One of the easiest ways to free your family of the financial burdens that often accompany the death of a loved one is to invest in a life insurance policy. Although getting life insurance is a relatively simple process, deciding how much insurance you should invest in can be tricky. So which factors should you take into consideration when choosing a life insurance policy for your needs? We have compiled a checklist that you can use to compare your current coverage based on the coverage amounts you may actually need.
If you do not have a separate insurance policy that covers funeral and burial costs, you want to allow for those final expenses in your life insurance policy. This cost can vary greatly, depending on inclusions so do your research to make sure you’ve covered all the bases.
If you have any loans or mortgages that need to be paid off, be sure to budget for those in your life insurance policy as well. Having money designated solely for paying off debts keeps your family from having to dip into their other resources or savings to settle those debts in the future.
Maybe you have children or grandchildren who will be attending college one day. If you had anticipated financing their higher education, be sure to include those figures in your life insurance policy budget. You can also include expenses for purchases you intend to make in the future, such as a car, home or business.
Loss of Income
If your family depended on you as their sole or primary source of income, you will want to account for that, too. You also need to decide how long you want to compensate for that loss. For example, if you suddenly died at age 45, but had planned on working until the age of 65, you would multiply your average yearly income by 20 years to know how much lost income your life insurance needs to compensate for. The time frame could be until your children graduate college, until your spouse reaches a certain age or any other milestone you choose. Just be sure that you choose a time frame that is going to provide sufficient coverage for a sufficient period of time. Also consider looking at govt stats to stay updated to the news in your country.
No life insurance policy comes with a ‘one size fits all’ guarantee. The key to finding a life insurance policy that is right for your family is knowing in advance how much coverage you are going to need. The checklist above is helpful for giving you a quick estimate, but discussing your needs with an experienced insurance agent is important. The agent can go over your current financial situation with you and tailor a policy that ensures both your family’s financial future and your peace of mind.