You have taken one step in securing your family’s financial future. Doing this means you’re concerned about the welfare of your loved ones and ready to help them maintain their standard of living in preparation for the inevitable.
The kicker is in knowing if you have enough coverage.
So, do you? How do you know if you have enough coverage? Life insurance is not “a one time” financial solution. As your life events and circumstances change, so will your coverage need.
To ascertain if one is underinsured is relative because everyone needs life insurance for different reasons – wait! You can read to know more about the reasons you need life insurance in our earlier publications.
You just might require adjusting your life insurance coverage. Here are five reasons you may need to re-visit that life insurance policy of yours to ensure you aren’t underinsured.
Five Reasons you may be underinsured
When there is an addition in your family
While you may have been maintaining a life insurance policy for yourself and your spouse. When a new member is added to the family, your life insurance needs to step up. You surely would want the best for your child, in terms of well being, medical visits and the crucial part of their upbringing i.e Education and other needs.
Such plans are enough reasons why you need to revisit your life insurance policy to avoid being underinsured and that your cover includes the additional members of your family.
Group life insurance is your only cover
Some employers offer life insurance to their employees. However, there are downsides to having group life insurance as your only form of cover. One is that the cover may not be sufficient for you and the loved ones you intend to cover since group life insurance is life insurance targeted at a specific group. It cannot be adjusted to suit your personal life insurance needs.
Another downside of having only group life insurance is that should you change jobs or lose your job, that’s the end of the cover. This leaves you seeking a personal life cover should that be the case.
Therefore, if the only kind of insurance you have is employer-provided, you should consider supplementing with a personal policy.
There is an increase in income
An increase in income would top the wish list of most people, but if your dependents rely on your income for their living expenses, then your life insurance coverage needs to match up.
The purpose of life insurance is to provide a cushion for your dependents to be able to live how they do when you’re no longer around. If there’s is a change in salary, then your coverage amount should change too.
You have debt to cover
If you have outstanding loans, mortgages, medical bills or other debts, you may need to get more coverage. Getting more coverage for this purpose is also a way to protect your dependents, as they may be saddled with covering up your loans and debts on your behalf which can cause a lot of financial strain on anyone.
Changes in financial goal
When your financial goals change, it’s time to adjust to your coverage needs. Say, for instance, the kind of protection you need when you’re single and saving for your wedding becomes different when you’re married and have kids. To be sure you and your loved ones get the adequate protection they need, you’ll need to review your coverage regularly.
To determine whether you’re underinsured, you’ll have to calculate the cash flow needs of your dependents and loved ones in contrast to your cash flow sources. If a shortage is identified, it’s easy to tell that you’re underinsured. knowing this, lets you determine the amount of life insurance you will be needing.