The importance of taking out a life insurance policy can never be over-emphasized, especially if you have dependents.
However, the journey does not end there. It is not enough to just take out any coverage. You have to be sure that whatever life insurance coverage you choose to get, would meet your objectives.
However, not everyone recognizes this fact. As such, a lot of people have taken out life insurance that is insufficient to meet their needs.
Here are some indicators that suggest that you may be underinsured.
Perhaps you took out a life insurance policy when you had fewer people to care for.
However, as your family size increases, it is advisable to increase its size to meet your present needs. You have to anticipate future obligations such as your kid's college tuition or wedding, and factor that into your policy.
If you are single, have an idea of how many kids you would love to have and which type of college you would wish they attend. It is better to overestimate than underestimate.
Most people believe that group life insurance provided by your employer provides you with all of the protection you require.
However, relying only on the coverage provided by your employer is a mistake. The amount provided by your employer may be insufficient to sustain your family in the event of your demise.
Secondly, group life insurance cannot be rolled over. This means if you lose your job, or quit from your employer, you are automatically yanked off any insurance benefits.
A bigger paycheck is always welcome.
However, this means that lifestyle inflation may creep in as you would want to up the ante on your family’s standard of living. However, when you pass away, would your family be able to maintain the same lifestyle?
A bigger income should also mean a bigger life insurance to ensure that your dependents are able to maintain the same lifestyle
Most people have the assumption that a stay-at-home spouse does not need insurance coverage because they don't generate any income.
However, if the policyholder passes away, the financial burden on the spouse could be much. Also, the domestic jobs may have to be outsourced to a third party because the stay-at-home spouse would have to look for a job to provide for the family.
For example, if the breadwinner passes away, the spouse may have to get a nanny or cleaner, or even eat out more frequently because there would be less time to cook.
Also, insuring a stay-at-home parent protects the earnings potential of the policyholder, because the breadwinner would not have to take a less demanding job to keep their household afloat.
Our priorities or goals in life change as we get older, and accumulate experiences. Items that may be on the top of our list of life goals would slip down the pecking order as we age. Coverage that may be sufficient when you were younger may be insufficient when you are retired.
For example, you may decide to include your grandkids in your coverage, or a dependent is faced with a life-threatening ailment and may need more care than earlier thought. As such, when it comes to life insurance, the cheapest option may not be the best option.
Always have at the back of your mind that life is topsy-turvy, and a once comfortable situation can change to an uncomfortable one.
Read this next: How Much Life Insurance Do You Really Need?
Most people are underinsured but are not aware of it.
Others are aware, but feel there is no need to level up their insurance coverage. The goal of insurance is to ensure that your family is adequately taken care of when you have passed. There should be no expense spared to meeting this need.
Apart from guaranteeing that your family is taken care of, it also puts your family members on a pedestal to aching their own goals and dreams because there is no financial burden to be worried about. It is advisable to review your insurance coverage regularly and update it when necessary.
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