Life insurance coverage is an insurance policy that is guaranteed to pay a certain amount to the dependents of an insured person after their death. For insured persons, it is an avenue to ensure their loved ones are financially secure even after the insured person has passed away.
For this insurance policy to be valid, you, the insured person, must ensure that your premiums are paid and that your policy is up-to-date.
Who Is an Ideal Candidate for Life Insurance?
While life insurance is a beneficial financial tool, it is not ideal for everyone. The following are the categories of people who do not need this insurance coverage:
- Those with no dependents yet have enough money to settle all debts and expenses associated with their deaths. Examples of these expenses are funeral, attorney, and estate fees, among others.
- Those who have dependents and also have enough assets to provide for the dependents’ needs after death.
However, if you fall in the following categories, you should purchase a life insurance policy:
- Those who have dependents or have debts that significantly outweigh your assets.
- Those who have a business or cosigned debts that their relationships would have to pay when they die.
It is worthy to note that life insurance does not cover all financial situations. For instance, a standard life insurance policy does not cover disability benefits. It also does not cover long-term nursing care costs. However, you can purchase riders that cover these situations for an additional premium cost.
How Much Life Insurance Do You Need?
To determine how much life insurance you need, estimate the amount of money your dependents will need. This will enable you to choose the amount of money your policy will pay if you die.
Below are some of the factors you should consider when doing this:
Life Insurance Coverage for Debt Payment
Life insurance can be used for numerous purposes, including clearing outstanding debts. For example, personal loans, car loans, student loans, credit card loans, mortgages, etc. Consequently, your policy must have enough to settle your debts when you die fully.
Life Insurance for Income Replacement for Dependents
A significant reason for purchasing life insurance is to replace your income, especially if you are the primary provider for your dependents. Hence, ensure that the policy coverage can substitute for your payment and protect against inflation over the ensuing years.
Insuring People Whose Death Will Affect You Financially
If you have other people who are important to you, consider insuring them. However, we recommend ensuring only those whose death will affect you financially. For instance, the end of an income-earning spouse will be a financial and emotional loss. Likewise, the death of a business partner with whom you have a financial relationship is also a financial loss.
The amount of life insurance you need to purchase depends on several factors. However, many financial experts recommend multiplying your yearly income by 10 or 15 to determine the amount of insurance you want to buy. You may also add an extra annual income to the total figure to hedge against inflation.
At Weaver & Associates, our insurance experts have the necessary tools and resources to ensure the financial security of your loved ones. For life insurance that will cater to all of their needs in case you die, get in touch with us today.