Thinking, discussing, and putting into action a plan that revolves around where your life is headed can be gut-wrenching. Many of us – well, most of us – like to hope that our life trajectory is on the straight and narrow, but those who have experienced a full life understand that this isn’t always the case. Life insurance is unlike other types of insurance. It’s not like third party car insurance, which is required by law, and it’s not nearly as fun as travel – which has the redeeming quality of helping you in an overseas emergency while you’re having an amazing experience. No, life insurance is often viewed as an icky subject – one that people put off for “later”.
While it may be easy to procrastinate, one question won’t be so easy to answer: what will happen to those who rely on you if the unfortunate does come to pass? And more importantly, how much would they need to not only survive, but be comfortable? With inflation rates and governmental changes demanding more resources from the everyday working class hero, it’s difficult to know what you need to put into place now to make sure your life insurance will cover your loved ones.
So how do you start to figure out how much you really need? Well, let’s start by taking a look at why you could need it.
Who Really Needs Life Insurance?
The golden question: Do I even need it?
There’s an easy answer for this confounding dilemma, and that’s to look at your life as a series of milestones.
For example, you’re a fresh-faced single, whose first milestone is entering the job market. You’ve got no major financial obligations besides paying your standard bills and no major debts besides your university degree. For you, paying a life insurance premium may not be high on your list of priorities.
However, if you’ve reached milestones where those in your life will suffer financially without you there, that’s when you may want to consider life insurance. With each milestone passed, it’s likely you’ll have taken on more responsibility for others. This is when life insurance becomes even more important
How Much Life Insurance Do I Need?
While everyone’s situation is different, generally, people include things like debts, education costs, the cost of known future expenses and whatever they’d like to leave to their family, to help them meet their day to day expenses. This method can work well for people who want their policy payout to cover any long-lasting liabilities like a mortgage or certain loan repayments and leave their family financially square. If you are considering this approach, keep in mind the fact that your partner could be raising children on their own. You need to ask yourself: How much will it cost to take care of them?
To get an idea of what you may need, Compare the Market offer a handy life insurance calculator to get you started. Be sure to factor in your lifestyle and any other unplanned circumstances that could make up your insurance plan.