The purpose of life insurance is to protect your family from financial hardship after your passing. Life insurance assists in minimizing your financial obligations in your absence. Often, consumers don’t have coverage. If you’re worried your life insurance coverage isn’t enough, don’t panic.
Take a deep breath and take these steps when you think your life insurance coverage isn’t enough.
Quick Article Guide:
- Determine Your Current Coverage
- Decide How Much More You Need
- Evaluate Life Insurance Options
- Partner with a Life Insurance Expert
- Seek Alternative Options
- The Bottom Line
Before you purchase additional coverage, you need to determine how much coverage you currently have. Your first step will be to review your employer-sponsored group insurance plan. These policies typically average 1-3 times the employee’s annual salary. If you’re unsure of the policy details, contact your Human Resources department for details.
Once you have reviewed your group plan, assess any other policy you may have purchased in the past. If you have been paying premiums but you’re unsure of the policy details, contact your insurance company for the provisions of the policy.
Reviewing your current life insurance coverage will help you assess your coverage shortage.
There are numerous ways to calculate the amount of coverage you need. Some insurance companies recommend multiplying your income by 10, while others recommend a complex evaluation of your financial needs.
In order to simplify your calculation, combine your expenses and total debt, then subtract your current coverage amount and assets. This should give you a rough estimate of the amount of coverage you need to support your family and manage your final financial obligations.
As a part of your expenses, you will need to calculate the number of years you want to provide financial support to your family. For example, if you have two children ages four and six, and you want to pay for their college education, you may need about $561,400 to support their financial needs.
According to the U.S. Department of Agriculture, a married couple will spend about $12,350 to $13,600 annually on a child born in 2015. If you account for $100,000 per college education, you will need over $500,000. After all, college expenses continue to rise.
You can also use this life insurance calculator to help you identify your life insurance needs.
Once you understand your additional life insurance needs, it’s time to assess your life insurance options. It may be wise to start by reviewing term life insurance policies and permanent or whole life insurance policies.
Upon evaluation of your insurance needs, you may determine that you will only need life insurance for a portion of your retirement years. Term life insurance is only available for a set amount of time. Most term life insurance companies offer 5, 10, 15, 20, 25, or 30-year policies.
Some agencies offer 10 to 35 times your earned income before taxes. Since this policy only covers a portion of your life, it’s generally less expensive. This makes term life insurance more attractive to consumers.
While permanent life insurance or whole life insurance may protect your family the entire span of your life. This type of policy usually has a fixed premium, a death benefit, and a cash value. However, the cash value may be very minimal, if any.
Click here for a more in-depth look at your permanent insurance options.
Try working with an independent insurance expert you trust. Independent insurance experts may have an abundance of policy offerings and can be a good resource for navigating the insurance shopping process. They may also help point you in the right direction with insurance comparisons. They understand the ins and outs of the life insurance industry and how to find the right coverage to fit your needs.
Keep in mind, some insurance agents will refer to themselves as experts, but this may be far from the truth. It’s important to note, you should steer clear of purchasing a policy directly with an agent that only works with one firm. Insurance companies will be eager to sell you a policy, and it may not be the best fit for your financial needs.
You want to work with someone who is on your side and has your best interest in mind.
Depending on your financial situation, health, age, and life insurance needs, it may be challenging to get the right amount of coverage. Whether you want to leave a significant legacy to your family or you have a substantial amount of debt, your life insurance coverage may still not be enough.
Instead of putting your extra cash toward other life insurance premiums, you could try opening a retirement or investment account to save for your future. A good rule of thumb would be to put at least 20% of your income (after-taxes) away for saving.
For example, you may want to start contributing to your employer’s 401(k) program. Many employers have a match program for their 401(k). A match program rewards you for participating in the plan. They may match your contribution up to a certain amount. If they match up to a 3% contribution, then you may want to contribute 3% of your income in order to receive the entire match. This is a great way to build your retirement savings while creating financial security for your family.
There are plenty of other options available for saving and investing for the future.
If you discover your life insurance coverage isn’t enough, there are plenty of options for meeting your additional life insurance needs. Partnering with an insurance expert can be one of the best ways to find a suitable policy.
At JRC Insurance Group, we have helped thousands of families and businesses with their life insurance needs, and we can help you, too! Our licensed agency extends to all 50 states and we’re independently owned and operated.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from more than 45 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Give us a call today, we would love to help! Toll free: 855-247-9555, or request a free quote here.