When you buy a life insurance policy, you select an amount of money that will be payable at the time of your death and you name the person or persons who are to receive that money (these are known as your “beneficiaries”). You may also have the right to determine whether that money will be paid in a lump sum or in a series of payments. Life insurance cover online.
All of these choices depend on what you want the insurance to do for you and your dependents. Most people buy life insurance to provide financial security for their families upon the death of the insured person. If this is your reason, the first step in calculating how much insurance to buy is to identify your dependents’ likely financial needs. If you are married, in a civil union, or have a significant other, you will want enough coverage to minimize your spouse’s or partner’s financial need after you are gone. If you have dependent children, you may want to help pay for their college tuition and other expenses. If your annual living expenses such as a mortgage on your home, personal or car loans, or property taxes are fairly high, you will need more insurance than someone whose home mortgage is fully paid for. You may also want enough coverage to ensure that your dependents do not have to pay for your final expenses, such as hospital bills and burial costs.
Next, you should make a list of all the sources of income and assets your family would have if they were without you right now. This list can include cash in checking and savings accounts, the value of any stocks and bonds you own, your home equity, and benefits from social security. Check to see if you already qualify for group insurance. If you do, consider taking advantage of it and adding the face amount to your current assets. Do not forget to include the ability of other members of your family to earn a living.
The final step is to compare the total of your income and assets with the total of your dependents’ anticipated expenses. Ideally, you should buy enough life insurance to make up the difference between what your dependents would have if you died today and what they actually would need. However, it is important to buy only as much life insurance as you can afford. Buying a policy you cannot afford and then losing it because of your inability to pay the premiums is good money thrown away.
One final consideration: the amount of insurance coverage you need to protect you and your family while you are young is different from the amount you need later in life. If you already have a life insurance policy that you bought years ago, you ought to take another look at the policy as well as at your own needs. Perhaps your circumstances have changed dramatically since the policy was purchased. You may need to purchase additional insurance or may be able to reduce coverage to meet your current needs. Review your life insurance policy regularly to make sure it still meets your needs.