No one is really happy about handing over their hard earned money for an insurance for something that they hope never happens, so why do it? In principle, insurance is a way of sharing the risks in life. If you have dependants who count on you, life insurance is necessary in order to give them the cushion should you die; and anyone who has to secure a big debt, like a home loan, needs to cover their loan.
Every parent knows this to be true: one of the reasons we most fiercely demand life and health is so that we are able to look after those who depend on us. Whether you are the sole breadwinner or share the responsibility, you know that should you drop out of the picture, the picture dims for those that are left behind. It’s not just their survival but also to ensure that they stay in the education system until they have enough security of their own not to fall prey to others. One way of giving yourself some peace of mind is to get the right cover in place.
The amount of insurance you need depends on factors such as age, income, the state of your health and the number of dependants you have. It is also likely that you will experience different events that call for changes in your insurance like getting married, buying a home, becoming a parent and future college expenses and finally retirement. Take a systematic approach to figuring your life insurance needs by calculating how much coverage you need and form a plan that can be updated easily when needed.
What you will need to consider when determining the amount of your life insurance is:
- Your final expenses relating to your funeral or burial.
- Outstanding debts and mortgages. This is the total of your mortgages and other debts to ensure that your remaining loved ones can continue their standard of living and not for instance be forced to sell their home.
- Educational expenses need to be considered with regard to the time your children will enrol into college or university. Look up current costs of colleges or universities and decide whether you want to cover the whole or just a portion of the cost.
- Current living expenses also need to be taken into consideration. Without your income, your family will experience a shortfall that needs to be covered in the event of your death.
Various insurance calculators are available online to help take the guesswork out of determining the amount of life-insurance you may need, but it is still advisable to speak to a knowledgeable agent before making any major commitments. Also, bear in mind that some insurance brokers could also over estimate so you need to determine and finalize on a number that both you and your surviving relatives are comfortable with.