For a short time I was in the business of selling life insurance. We were told to do what it took to get the sale. When it comes to life insurance, different people should buy different amounts. If you have a spouse and or children that rely on your income, then chances are you need life insurance. Lets explore how much insurance is enough for you and your family.
You must first consider your assets. Are your house and vehicles paid off? What bills would be left behind for family members to have to pay? You must decide an amount that will cover your debts, funeral expenses, and extra monies for your family. Quite a few people get basic life insurance. It is usually enough to pay off funeral expenses, medical bills, and maybe have a few thousand left over.
It is possible to have to much life insurance given the fact that you are paying on that policy. If you can afford to pay for a large policy, then having a big insurance package isn’t that much of a concern. Paying on a policy could result in a waste of
money on life insurance that may be inappropriate for your needs, and that may be ineffective. The worst scenario would be financial hardship due to not having enough life insurance. Some people can’t afford life insurance at all. It is important to keep in mind that having more than one needs, isn’t a bad thing as long as you can afford to pay the premiums. If both you and your spouse are working, yet you cant afford life insurance on both you and your spouse, then the primary money maker should have a policy in place first. That is because the family is more dependent on that persons income. The less dependents you have, the lower amount of insurance is needed.
Sometimes it may be dependent upon your health as to how much insurance is suggested to purchase. Some insurance companies may not be willing to take a risk on you for a big policy, if your health is not so good. It is great to buy insurance when you are young. It is also great if you can prepay for funeral expenses while you are young because regardless of how much funeral rates will go up in the future, yours is already paid for and you will not have to pay more due to rise in price.
There are a couple types of life insurance. Term insurance is is a less expensive policy for those ages 40 and under. Although these policies do not build cash value, they can usually be converted to whole life policies without an exam being needed. There are several different types of cash value insurance policies. With whole life and universal policies, you have a guaranteed cash surrender value. With universal insurance policies, premiums can be made month to month. This may be more convenient for people not wanting to jeopardize cancellation of their policy because of inconvenient payment periods. You may borrow against a cash value policy. If you die with an outstanding amount due to a loan plus interest, that amount will be subtracted from the benefit pay out.
Add your bills up and tack on the price for what the average funeral costs today. The average funeral costs around 5,000-6,000 dollars. Take your yearly wage and times it by, lets say two. If you make 50,000 a year and times that by two, that is 100,000 dollars. Multiplying your income by two would give your spouse a couple of years of not worrying about expenses. Lets say you owe 200,000 on your home, cars, and other expenses. It would be fair to say that a 300,000 dollar policy could be adequate. If you would want enough money to live on for 10 years, then 50,000 times 10 would be 500,000 dollars plus the 200,000 dollars in bills would mean that a 700,000 dollar policy would be appropriate. You must also add in any expenses needed for surviving children. Such as education and even emergency fund money.
It is also important to remember that you will have restrictions with your policy. Certain types of deaths are not covered, therefore your family will not receive a life insurance pay out. Make sure you read and understand everything in the policy before you agree to it. You must also be truthful on your policy. If the policy asks if you are a smoker and you say no , then the company later finds out you lied, they do not have to pay out the life insurance claim. You need to be very honest when signing the policy. Just because one insurance group may deem you uninsurable, it doesn’t mean that all companies will do the same.