How Much Additional Life Insurance Coverage Do You Need?
Published On Mar 31, 2021, Updated On Apr 26, 2021
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The world is moving at a pace faster than ever and there are new developments and changes regularly. Living under such circumstances, it is important for us to look into the financial security and stability of our future. Additionally, we must also invest our current income judiciously. All of this is efficiently achieved by purchasing a life insurance plan.
The coverage of a life insurance plan defines the amount of financial assistance available to you during uncertain times. The basic rule of thumb states that your life insurance coverage should be 20 to 25 times of your income. This coverage will also ensure the death benefit that will be received by your beneficiaries on your death.
Also Read:- How Life Insurance Helps in Getting a Home Loan?
Why Should You Get Additional Life Insurance Coverage?
There might be several reasons for you to consider additional coverage, other than the life insurance plan that you had previously such as:
- Stability of income
- Increase in income
- New and increased loans
- Ailments and related financial liabilities
Factors Influencing Amount of Additional Coverage for Life Insurance Plan
The increase in your coverage must be carefully calculated. The additional amount, that is the difference between your current amount and the ideal amount, depends on various factors. You must take into consideration all your financial liabilities before you fix the amount. Here are some factors you might consider for the increase:
Unpaid loans come off as a huge burden to family members when the policyholder dies. To help them pay it off without troubles, there must be sufficient coverage and death benefit from the life insurance plan. Every time you take on any new loan, you must also calculate your life insurance coverage and consider an increase of coverage.
2. Disease and Disabilities
If you or any of your family members contract any critical or terminal illness or have any disabilities, you should try and consider additional coverage for your life insurance plan. These situations usually bring additional medical charges that can make one the subject of financial strain.
Having children also means added financial responsibility, especially in terms of ensuring their financial security in the future and in your absence. This is why consider an increase in your coverage once you have children.
Overall, the amount of additional coverage is entirely dependent on personal circumstances and situations. Generalizations may lead to mistakes in such calculations.
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To have additional life insurance coverage, make sure to contact your life insurance company or agent. You can add riders to your basic plan for additional coverage or buy more coverage under your existing plans. Always look out for the maximum protection and benefits that you can provide to your family so that they do not have to face any troubles in your absence.