Tuesday, December 12, 2006

Life Insurance - How Much Is Enough? Here Are A Few Things To Consider

Many people don't care to talk about the topic of life insurance, because to them, it's to "morbid". Well, it is morbid. It's never pleasant thinking about how life would be for you if you lost a loved one, however, these things do happen every day and the statistics don't lie. It's simply a fact of life. At some point in our lives this is something that most of us will have to go through. Doesn't it make sense to be prepared for it rather than be placed in an overwhelming situation by waiting until it happens?
One thing that makes buying life insurance so complicated for many people, is the question of "how much do I need"? Now, to much is never a bad thing as there are always going to be unexpected expenses that will pop up, but the amount that you'll need to purchase is going to depend on several different factors. These will vary depending upon certain factors and also whether the person being insured has a family or not. Below are a few things to consider before purchasing life insurance.
Are You Married Or Single? - Obviously, there's going to be a different level of resonsibility (in most cases) between a married person and a single person. Single people would need coverage for their final expenses, such as paying for their funeral. This alone can run up into the $7,000-$10,000.00 range these days, with most of that cost being for a casket. You can purchase a burial policy by itself if you have no other expenses to consider. This can be a huge burden for a family member that ends up with the remaining bill of an uninsured person, be it parent, child or sibling. They not only have to go through the grief of a lost loved one, but also the added financial burden that was unexpectedly placed on them.
Personal Debt - You'll also want to have enough coverage in order to repay any outstanding personal debt that you may have. This is especially important if you've had someone co-sign on a loan for you as they would be fully responsible for repayment in the event of your death.
There are many different variables to consider for married couples. Do you have children? If so, how many? Do you want them to be able to attend college? What are their ages? Are you the breadwinner (primary source of income) in your household or do you and your significant other share expenses? Do you currently have a mortgage or do you rent? Do you have outstanding debt? If so, how much? What is it for? Is it secured or unsecured?
There are many more questions to be answered here, but let's just assume that you are the breadwinner and your wife works part time and is a homemaker the rest of the time. Let's also assume that you have two children. You have a mortgage, car payment, some credit card debt and have financed some household furniture.
I want to keep this as simple as possible just because each person's situation is going to be different, but in this case, you would need enough coverage to support your wife and children at least until the kids turn age eighteen. You'll also need enough to repay any personal debt that you currently have. You could purchase a seperate decreasing Term Life policy called "Mortgage Life" and other specific policies such as "Credit Life". These would pay off any outstanding debt that you may have.
You would also want to sit down and figure out your basic household expenses. These include utilities, food, misc household items (toiletries, cleaning supplies, ect.), insurance premiums (car, life for wife and kids, homeowners, dental, medical ect.), savings, gasoline, clothing, school expenses, emergency fund (car repair, ect.) and anything else that may not be listed here.
If you've read this far and don't have any insurance, you may have just received a slap back into reality. It takes a lot of money to pay for our most basic daily, weekly and monthly expenses. Do you have the coverage that you would need to have in the event of an unexpected tragedy? Something to think about. By Joe Stewart