Life insurance is an important part of preparing for the unexpected. But how do you know if you have enough? Often employers give some coverage, but it may have its limits. You may want to extend that insurance at your workplace, or buy a private policy that fills the gaps.
Here are some examples of when you might want to take that step.
1. Existing Coverage is Not Enough
A typical workplace plan offers a benefit equivalent to a multiple of your salary. But if the worst were to happen, that may not leave enough money for your loved ones. Take a tally of your family’s outstanding debts and potential living expenses. That salary multiple may not cover the mortgage, child care, and day-to-day obligations your family must incur.
2. Restrictions on Current Coverage
Review the conditions of your employer’s policy. Sometimes, it’s restricted to accidental death & dismemberment, which only offers a benefit in certain circumstances. That may leave your family without any coverage if a tragic event falls outside the terms of the insurance.
3. New Financial Obligations
Life insurance should protect against financial devastation. So it makes sense that you may want extra coverage if you take on new financial commitments. Perhaps you or your spouse have just bought a home, co-signed a loan for a loved one, or started school. If there’s any new long-term obligation that’s coming out of your budget, consider more life insurance.
4. Changing Family Dynamics
Major life events change everything — including the preparations you have to make for loved ones. If you get married or divorced, plan to have children or have one on the way, or have become the caregiver to a vulnerable loved one, there’s added responsibility. The coverage you have in place just might not be enough to provide security to your dependents if you pass away.
5. Plans to Change Jobs
Your employer’s life insurance plan usually doesn’t go with you if you quit. If you anticipate career transition, you may want to put your own private coverage into place. That insurance is yours no matter where you work, so you don’t have to risk losing out in case you want to make a move.
6. Term Preference
Life insurance is normally for a set term, for example 30 years, or for life. The latter is called permanent or whole life insurance. Your employer’s insurance may only cover you for a term, and permanent life insurance might make better sense for your family. You may want to buy your own permanent life insurance, or if you have the option, switch to a permanent plan through your job.
You may be able to switch to a permanent plan from a term plan through your existing insurance without any additional medical questions. This is particularly beneficial if you have experienced a recent illness or are in the later stages of life.
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