Most people do not alter their life insurance policies after they’ve obtained it. While many polices can be altered – for example, requesting more or less depending on your needs, or converting a term life insurance policy into a whole life insurance policy – the vast majority of those that obtain life insurance typically keep the same policy until it expires.
That means that, while you’re not technically locked into any specific life insurance policy, most of the time you’re going to stick with the policy you have. That means it is especially important to make sure you’re getting the right amount – not more than you need, but not less, either, so that you don’t have to worry about not having a policy that suits your life for the months and years to come.
How Much is Too Much (and How Little is Too Little?)
It’s important to realize that you probably need more than you think you do. Often, people assume that they need a small policy that covers only things like the funeral and a bit of extra money to help your family get by. But your family’s financial needs – and your absence – are likely to require much more than that.
Insurance is about protection in the event of an unexpected tragedy. Your loss is more than a temporary financial problem. It is a lifelong issue that can set back families for years or decades. The loss of a $50,000 annual income (for example) is a loss of $1,000,000+ over the next 20+ years
As such, a person typically needs and wants enough life insurance to address expenses that arise over a family’s lifetime that normally would be supported by the additional income. For example:
- College
- Mortgage Payments
- After School Care
- Retirement Savings
- Vacation Money
These are not luxuries. Imagine that a couple with one child, both of whom are working parents, have purchased a home. Then one parent passes away unexpectedly. That parent would have been able to cover half the mortgage, half the after school programs, half of the car payments, half of the food, and more, for 20-50 more years.
What life insurance is meant to do is make up financially for these losses. While many people think that they need only a small life insurance policy to cover costs like funerals and a few payments from missed work, what it is meant to cover is the expenses associated with a person’s absence. Those can be significant, which is why it’s important to choose a policy that addresses all of those expenses.
Doesn’t That Make Life Insurance Unaffordable?
Increasing the total value of your policy does increase the cost of life insurance. But there are many different plans available with varying cost commitments, able to fit a variety of budgets.
Term life insurance is usually the most affordable, and can offer larger policies as well. Though it’s not possible to give an exact quote for term life insurance without calculating your age, the total value of your policy, your health, and other factors, a person in their 30s and 40s (when most people have younger children) can often obtain $500,000 of term life insurance for the mid-low double digits in monthly premium – less than most people spend on coffee in two weeks.
That means that if you expect your needs to be more significant – for example, you calculate that you may need $1,000,000 in life insurance or more – the total cost may not be as high as you expect, while the level of protection for your family increases considerably.
Other forms of life insurance may be more expensive, but when they fit a person’s budget, they can also be more advantageous. For example, if you’re young and healthy with a good income, limited pay whole life insurance can be a great option. You can pay for life insurance for a specific number of years (for example, 20 years), after which your life insurance policy is typically locked in for life and some may also offer help for retirement.
Choosing the Right Insurance for You
There are many insurance products out there, and many policies and policy options to choose from. You never need to get more insurance than you need, but you also need to make sure you do not get less than you need, either.
At Kaia Insurance Group, our role is to help figure out how much insurance you need and make sure that you get the best policy for you. We’ll discuss policy options, prices, and more, and make sure that you have the best policy available – one that will meet the needs of your family.
Please contact Kaia Insurance Group for more specific policy information.
