Thinking of buying a life insurance? Like most people, you would also be interested in getting a life insurance Policy that can protect you and your family. But are you having trouble deciding on how much Coverage you would need? It is important to know here that there are no strict rules and regulations that need to be followed when deciding on the coverage you need to buy. However, there are certain strategies and rules of thumb that are recommended to remember so that you obtain enough coverage.
Set up Your Goals
The first thing that you need to do when deciding upon a life insurance policy and how much you need is setting up goals. Imagine what it would be like if you lost your life in an unforeseen accident. Ask yourself:
- Are there any debts or a mortgage that you would want to be taken care off at your death?
- Would you want to be sure that someone who is financially dependent on you has money for survival after your death?
- Would you want to be sure that your child has money to go to college and complete his or her education?
- Do you own enough assets to cover expenses incurred on your funeral and final medical treatments? If the answer is no, do you want to provide some money to your family to take care of these?
- Would you want your life insurance to fulfill other goals of your life like for friends, family or any charitable organization?
Once you have answered all of the above questions, you need to set aside an amount for each of these categories. You have to think of the life insurance claims you need after your death. The coverage provided to you by your life insurance policy will depend mostly on:
- Your Current Income: It is important to consider your current salary when determining the coverage you wish from your life insurance policy. The standard rule of thumb says that you should opt for a life insurance policy that is worth about five or seven times of your salary.
- Understand The Needs of Your Dependents: The primary goal of life insurance is to make sure that your dependents (like wife or child) have enough resources to satisfy their needs and maintain a decent lifestyle after making the life insurance claim. For instance, if your spouse is working or your child has completed his or her education and is earning, you would not need as much coverage as someone who has a spouse staying at home and small children.
- Deciding for How Long You Need the Coverage: Apart from deciding how much coverage is needed, it is also important to determine how long you need the life insurance Claim to be for. Most insurance agents will suggest you to have a life insurance policy for your entire life but this is not really required. The main reason of the policy is to help your dependents after all.
Setting up goals for the life insurance makes it easier for you to decide how much coverage you need. Nonetheless, it will always be beneficial to discuss the matter with your financial advisor or Insurance Agent
and get a more professional judgment. They will be able to point out any loopholes or strategies that you did not notice. Life insurance claims can help your family at times of dire need. So make sure you choose a life insurance policy
which completely suits your needs.