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How do you know when you have enough life insurance?

Written by Life Insurance Dad, Thu, Feb 18 2010

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How do you know when you have enough life insurance? Odds are decent you don’t. Not nearly enough families go through the necessary steps to secure their futures against the worst case scenario of losing a loved one before their time. And of those families who do, many make the mistake of not reevaluating their needs as time passes.

Pages will always fall from the calendar. Our lives will always evolve and our needs continue to change. Even if you signed up for the life insurance policy that was perfect for you at the time of its purchase, it doesn’t take much for life to twist your needs into something different entirely.

Setting a policy firmly in place is important, but knowing when you have enough life insurance is also essential to your overall feeling of financial security. The following list contains a list of those four key times in life when it is best to reevaluate your life insurance policy and the amount of coverage you are currently carrying.

Four times it is good to wonder when you have enough life insurance

  1. You get married and purchase a new home
    2. Once you have purchased a home with your spouse, it is their name that is splitting the title deed. This means you must do everything you can to safeguard their interests. In the worst case scenario of your unexpected demise, you cannot afford to have your partner saddled with a mortgage and no way to pay.

  2. You have children
    3. Bringing a child into the world is a never ending drain on family resources. This is to be expected and most families grow comfortable with the ebb and flow of expenses, but a loss of the primary source of income can turn it into an insurmountable obstacle. Of course, remember to account for the true value of a non-income earning spouse too (ie. A stay-at-home mom or dad).

  3. You gather debt
    4. Life happens and it is all too easy to find yourself with mounting debt such as personal loans and quickly growing credit card balances. It is important to make sure you have enough coverage to take care of any extraneous debt you have gathered and not leave it to your loved ones after your passing.

  4. You start making more money
    5. Life is proceeding swimmingly and you find yourself enjoying the fruits of your hard work. You have finally earned the pay raise you have worked so hard for and moved your family into a larger house and your children to private school. The higher cost of living becomes a constant as does the debt and mounting monthly expenses. This increase in lifestyle will quickly erode an antiquated policy.

    Though it is far more common to be under insured, it is also possible to be over insured. Only by reevaluating your life insurance can you know if the coverage you are currently carrying is the coverage that is best for you.

    Life is filled with constant change. The only way you can ever truly know when you have enough life insurance is to constantly reevaluate your life style along with the accompanying needs.