When you are going to set a limit to your life insurance policy, you’ll want to take every aspect of your life into consideration. Life insurance policies offer a great deal of financial assistance for your loved ones and family members. Putting a cap on your life insurance may reduce your rates and make the bills more manageable, but it could be devastating to your family if the limit was set too low. Below, you will find some things to take into consideration when setting a life insurance limit.
Consider who you may leave behind and what their needs are.
Most people purchase life insurance because they want to protect their family members should something happen and they are left alone. When you are setting a life insurance limit, consider the family members that you may leave behind. Will they have some type of financial security without your assistance? Do they have specific needs that need to be catered to with the life insurance policy? Life insurance can provide assistance for more than just their immediate needs like shelter and clothing. Life insurance can be used to support your children through college or help with everyday expenses such as maintenance to a vehicle. If your life insurance limit is set too low, there won’t be enough funds left over to account for these expenses.
Family members need to be well taken care of.
The quality of life that your family members have is likely very important to you. When setting a life insurance limit, keep their quality of life in mind. Life insurance can support your family in many different ways. The average family does not save enough money to account for unexpected events such as the loss of a parent. It’s unfortunate, but most families don’t have a savings account that is substantial enough to live off for more than a year. Families today are accustomed to overspending and living outside their means. While the loss of a family member could change that, you probably are not preparing for this type of tragedy.
Don’t mistake a retirement fund for a savings account.
Retirement funds and 401k’s provide assistance should you reach the age of retirement, but they don’t account for unexpected tragedies. This is a common mistake that many families make. Life insurance is one of the few things that can provide financial assistance immediately after the loss of a family member. Retirement funds are not a sufficient replacement to a life insurance policy and it’s important that they are not mistaken for a savings account.
Account for unexpected struggles.
It’s important to account for unexpected struggles with your life insurance limit. Many families believe that if something happened, the other parent would be able to find a job and keep the family afloat. This does not take into account that it can be difficult to find a job at times, especially during a recession. Most people are unable to find a well-paying job right away, so they may have to work their way into a higher paying position. This could leave the family in serious financial need while the income is not as high as it once was.
Author Bio: Suzie Miller works for lifeinsurance.org.uk a company that provides comparison rates for life insurance policies.