You Have Life Insurance But Is It Enough To Protect You Or Your Family?

Why We Buy Life Insurance
We buy life insurance either to cover our debts, leave someone we love some money, or both in the event that we pass away.
But when you bought your insurance policy, did you really know how much you needed? Will the policy cover your burial costs, pay off the house, car and other debts, send the kids to college, and provide the family with the monthly income they need?
If you get sick, will you be able to use the policy while you are alive to pay medical bills, nursing home expenses, or for a nurse to come to the home to take care of you? Have you borrowed any money from the policy? Did the monthly premium ever increase without you having to pay the increase?
In all of these cases, you may not have all of the life insurance that you need. You also may not have as much cash in your insurance policy as you think.
What Is A Needs Analysis?
It is the very first thing your life insurance agent should go over with you. It’s a simple questionnaire that generally helps you and the agent figure out how much life insurance you really need. It covers:
- Your sources of income (employment and other sources)
2. Your debts (mortgage balance, funeral expenses, kids future college expenses)
3. Your family situation (spouse, number of children, their ages, and how long your insurance needs to last after you are gone)
4. Total Savings
These things tell how much insurance you need to protect your family financially if you were to pass. If you have less insurance than this figure, you are more than likely under-insured and your family may not be completely protected by your current coverage.
Life Insurance From Your Employer
Many employers offer life insurance to their employees. If you do a needs analysis, you may find that your employer is not offering you enough insurance. My last employer offered $50,000 in life insurance for less than $10 a month. But there were two issues with this:
- If I passed away, $10,000 of that would go to my funeral, leaving my family only $40,000. I needed my family to have my income coming in for another 10 years. That meant that I really needed $500,000 worth of insurance to replace my income to help them financially
- The insurance rate would skyrocket in price if I quit or got fired from that job if I decided to keep the coverage.
So I got additional life insurance outside of what my employer offered. The reason? I was under-insured and I could also lose that insurance coverage if I parted ways with my employer.
Living Benefits
There are some life insurance policies that offer living benefits. These may be called accelerated benefits in some policies which can be used while you are alive. They kick in if you are terminally, critically, or chronically ill in general. These policies can pay for medical or nursing home expenses and also for nurses to come to your home to take care of you. This alone can be the difference between you being taken care of at your own home or having to go to a nursing facility because you do not have the insurance to pay for at-home care.
Many people have life insurance policies that do not have living benefits. You spend many years paying into your life insurance policy. You may as well be able to use the money from the policy while you are alive.
You May Have Less Life Insurance Than You Think
Many people do not know what type of life insurance policy they actually have. It is not uncommon for a person with a term life or universal life policy to think they have a whole life policy. It is also not uncommon for people to forget that they took out a policy loan at one time. If you took out a policy loan and did not pay it back, you may be getting charged interest that is being taken out of your cash value. So, while you think you have a certain amount of cash value, it can be significantly lower than you think if you have an unpaid policy loan.
In addition, if you have a universal policy and the rate has increased but you are still paying the same monthly premium you always have, this may be because the insurance company is taking the extra cost from your cash value. In both the whole life policy with the unpaid loan and the universal policy with the underpaid premium, what may be happening is:
- You are losing your cash value
- In the case of the whole life policy, once the cash value runs out, your policy may lapse and you will no longer have insurance
- In the case of the universal life policy, once that cash value runs out, your policy may lapse or you will have to pay a higher insurance rate that you may or may not be able to afford
How To Figure Out How Much Insurance You Have And Need
The best thing is to have an insurance professional look at your current policy and also do a needs analysis. These things can help you understand how much insurance you actually have and how much you really need to secure yourself and your family.
Request A Professional For A Free Policy Review And Needs Analysis
Talk to a life insurance agent. If you live in the state of South Carolina, you can request a free policy review and needs analysis at the life insurance topics contact page. If you live elsewhere, you can still request information and a reputable life insurance professional in your state will be located for you.
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