For many people, life insurance is an effective way to protect their family members and other dependents from financial hardship in the event of their death. However, it can often be difficult to know how much life insurance you need. Your goals, needs, and financial obligations may change over time. Life can change quickly. Major life events could signal a need for either more or less insurance coverage, so it's often helpful to reassess your protection and make any necessary adjustments. Not sure whether it's time to review your coverage? Below are three signs that your life insurance needs may have changed:
Your family situation has changed. Many people buy life insurance to protect their children and other dependents. After all, if your spouse and kids rely on you for financial support, they could face a difficult situation if you were to pass away unexpectedly. With life insurance, they can get a financial benefit upon your passing, helping them overcome any financial challenges that may arise.
If your family has changed recently, you may want to examine your coverage. Perhaps you had a child, or maybe you married into a blended family and added several new dependents. If so, you may need more coverage, at least until the children are grown and financially independent. Also, your kids may have recently become financially independent, if so you may want to scale back on your coverage.
You bought a home. Many Americans use a mortgage as an effective tool for funding a home purchase. While a mortgage may make home ownership more accessible, it also can create a sizable debt. If you provide income to the household and you were to pass away, your family could be left to pay the mortgage balance on their own. If they don't have resources to pay the mortgage, they may have to sell the home.
You can use life insurance to help them pay off the mortgage after you pass away. That can help them stay in the home without facing significant financial obstacles.
You started a business. Starting your own business can be a financially and personally rewarding experience. However, it can also bring some financial complexities into your life. For instance, you may have to take on business loans to get your company off the ground. You may have financial obligations to employees, vendors, and other business partners. If you die, how will the business continue and how will your family meet these obligations?
Life insurance can provide your family or your business partners with much needed liquidity to keep the business afloat after your passing. If you have a partner, you could also create an agreement in which your business partner uses a life insurance death benefit to buyout your share from your family. That ensures that your family will be compensated for your hard work.
For more information, talk to a life insurance agent. They can help you review your needs and they can recommend the appropriate coverage.