JULY 2, 2020: Even without a global health pandemic, having life insurance and looking into life insurance rates are important for any individual. While we can’t predict when our time is up on this earth, we can control how much of a payout we leave behind with a life insurance policy. So, how much life insurance should you have?
Here’s a closer look:
What Does Life Insurance Cover?
Life insurance is an agreement where an insurance company will agree to pay a specified amount after the death of the insured party as long as the premiums are paid and updated. Policies give insured persons the assurance that their family will have finances to fall back on in the event of their death.
Life insurance is divided into two categories: term and whole. Whole Life will provide insured parties with a cash value, taking the premiums that are paid and investing them. Term Life Insurance pays out if someone dies within a certain time period.
Who Needs Life Insurance?
There are, in fact, some people who won’t opt to purchase health insurance because they think they don’t need it.However, having a life insurance policy is a great way to leave a legacy to your favorite charity or institution. But for those with a family, a spouse, those that are a legal guardian of a minor and so forth–they would best benefit from a life insurance program.
Life Insurance Needs
A major part of choosing the right life insurance policy comes down to how much money dependents will need after the insured party has died. So, how much life insurance do you need? That depends. Choosing the benefit amount a policy pays if someone dies depends on a few different variables:
- Debt: All debts must be taken into account first. This includes credit cards, car loans, mortgages, etc. If someone has to pay $5,000 on a car and $175,000 on a house, then they need at least a $180,000 life insurance policy to cover their debts. But interest should also be considered in the process, so taking more than your debt ratio will help to cover the rest.
- Income Replacement: Another major factor with a life insurance policy is considering a replacement of income. If someone is the sole provider for a family, they will need a sizable policy payout that is large enough to replace income plus more to account for inflation, final expenses, etc.
- Insuring Others: There may be more people who depend on the income of an insured party in order to get by. While most people think the children of an insured are the only ones who benefit, it’s actually anyone who would take on the financial burden if the insured party dies. This could be a business partner or someone who co-owns a property as an investment. There must be an insurable interest.
About National Catholic Society of Foresters
At National Catholic Society of Foresters, we pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.