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When Should Individuals Increase The Amount Of Life Insurance Cover They Have?
Most individuals take out an a life insurance policy only once in their lives, and as time progresses and they go through the various stages of life without purchasing more cover. Here are key stages in an individual’s life where they should be either buying life cover or bulking up what they do have.
(1) Buying A First Home With A Spouse
Taking out a life insurance policy when one gets into large debt such mortgages for buying a house goes without saying, it is the only way an individual can offer protection to their partner from un-repayable debt in the event of death.
(2) When There are Other Debts And Dependants
Personal loans and credit card debts are also liabilities for a partner, so the amount of life cover taken should be enough to ensure that those debts can be paid. Unsecured financing will be collected from the estate of the individual otherwise and this could have negative effects on the individual’s family. It is better for life cover to be large enough to be able to pay of the debt.
(3) When The Individual Gets Married
This is a fairly obvious time in life to obtain life insurance cover, and one should ensure that that the cover is large enough to provide for the contributions the individual makes to the common finances of the partnership, and that the spouse is not saddled with debt in the event of a death.
(4) Starting A Family
At this point, most people will have purchased life insurance cover, it is at this point that individuals should take another look at their policies and work out whether the amount of insurance cover is adequate, now that there are new dependants to the family. A death at this point could be catastrophic if cover is not adequate, so it is probably a good idea to increase the amount of cover.
(5) If An Individual Becomes A Stay At Home Parent
There is a common misnomer if an adult forsakes their career in order to stay at home and raise children that they do not need life insurance cover. This could not be further from the truth, and a parent who stays at home should by a life insurance policy which would cover the cost of childcare and running the household should there be a death.
(6) If An Individual Has More Children
This is a fairly obvious time to increase the amount of cover. The simple rule is the more dependants there are the more cover the individual should obtain
(7) Moving To A Larger House
Larger houses often mean the size of the mortgage increases, and the simple rule again is the more debt that is carried the larger the amount of cover the individual should obtain.
(8) An Increase In Salary
For those individuals who find themselves climbing the corporate ladder at work, an increase in salary can mean many things, a more affluent lifestyle, larger house, private education for the kids. But individuals who find that their incomes have increased should also think about upgrading their life insurance cover.
(9) Relying On Someone Else For Financial Support
If an individual has someone else supporting them financially, then they should think about taking out a life insurance policy to insure that person’s life. In theory it is possible to insure any individual provided the person insuring someone else has an insurable interest, such as being negatively impacted financially in the event of that individual’s death.
But don’t be over-insured
Though changes in circumstance over one’s life can often mean requiring additional cover, these changes do not necessarily mean a person needs to buy more cover. For example if an individual has no dependants, then they do not need to be carrying a life insurance policy.
Policies can easily be cancelled at a later date, and when people have finally paid off their house and their children have left, and it is important that individuals do not pay for cover that they do not need.
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