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How Much Life Assurance Should You Carry?


How Much Life Assurance Should You Carry? – You must have heard the saying that death is inevitable and your death is not as painful to you as the people you left behind especially if you are the breadwinner of the family and you have people that are dependent on you. But it will be better if you have something that will serve as a succor to the people you will be leaving behind especially your loved ones who are dependent on your income.

This is why you would need life assurance as it will help pay-off debts, manage day-to-day living expenses, cover funeral and burial expenses and other expenses so as to help lessen the financial burden on the people you leave behind.

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If you don’t have life assurance, after reading this article you will start considering it as we are going to give you in-depth details of what life assurance is and how you can actually go about it.

Life assurance is one of the most important insurance plans that anyone should have as it provides cover for those that are dependent on you so they wouldn’t be hit with financial burden on the event of your demise.

Without much stress, let’s jump into what we have…

Table Of Content

  • What is life Assurance?
  • Types of Life Assurance
  • Who needs life assurance?
  • Reasons for taking life assurance
  • What is the minimum amount of life assurance I need?

What Is Life Assurance?

This particular insurance covers human beings and not properties and it is not benefitted by the insured but others that are dependent on him or her. Life assurance is the insurance against the death of a person where the insurance company agrees to pay a certain amount of money after the death of an insured person as long as the person pays the agreed amount as premium.

Here, the risk covered will inevitably occur but the time it will occur is what is not known unlike some other types of insurance that might not happen.

The insurance policy gives the insured person an assurance that their spouse, children and other loved ones will be financially taken care of and that they will have peace of mind even after their death.

In purchasing life assurance, you will be required to take a medical exam to ascertain that you are not suffering from a serious illness as at the time of taking out the policy.

Types Of Life Assurance

  • Term Assurance

The payment in this policy will be made to the assurer if the life assured dies within the specified period in the contract. The assurance is for a number of years maybe 25-35years depending on the age of the person and also how long you need the coverage. It is cheaper than the other types of life assurance policies and sometimes you might be allowed to renew your coverage after expiration.

  • Whole Life Assurance

This type of life assurance lasts for the life time of the life that is assured and the agreed money to be paid is being pay only after the death of the insured person provided the insured pays premium throughout his or her life.

  • Endowment Policy

This type of policy is to pay an agreed sum of money either after a fixed number of years or at death depending on which event occurs first. Sometimes a certain amount is paid in the event of a critical illness.

Who Need Life Assurance?

Like you must have seen that life assurance is a strong and sound financial plan every individual should have especially if you have people that are dependent on you. In as much as everyone should have the policy, not everyone can.

If you are the main provider for your dependents or you have a significant amount of debt that outweighs your assets, you can consider taking a life assurance as you definitely need one so as to ensure that your loved ones and anyone depending on you are well taken care of after you are gone.

Also, if you own a business or owe cosigned debts like private student loans that someone else could be held responsible for in your demise, then you should considering taking a life assurance.

You should also know that life assurance doesn’t cover every situation and if you are not married or don’t have any dependent that could be held responsible for any debt in your absence, you don’t need life insurance.

You could also take life assurance for you and your spouse if you are married regardless of who is the breadwinner of the home.

Reasons For Taking Life Assurance

Like you must have seen that taking life assurance is a great financial plan and it will act as a succor for your family and loved ones when you are no more. Some people take life assurance for a number of reasons and this is what we will be looking at now.

  1. It provides for permanent disability through the endowment policy
  2. It is a means of saving for the future as the life assurance provides a lump sum of money on retirement.
  3. It provides for one’s dependents when they are no more.
  4. It can also be used for providing for old age
  5. It can be used as a source of loan repayment when the person dies
  6. It can serve as collateral to obtain loan from banks.

What Is The Minimum Amount Of Life Assurance I Need?

In choosing a life assurance policy, the major part is determining how much money your dependents will need and the amount that your policy will pay when you die. All these depend on a number of factors as it differs from person to person.

Let’s look at some of the factors you should put into consideration when choosing a minimum amount of insurance.

  1. Insurance replacement

This is one of the biggest factors that determine the minimum amount of life assurance you will need. If you are the primary provider for your dependents and you bring in an income of $40,000- $50,000 per year, you will need a life assurance policy that is large enough to replace your income and also include extra against inflation. Doing this will help you determine the face value of what your insurance policy should be like then you can now consult an insurance estimator to help you determine the actual value you will need.

  • Debt

Like we have mentioned in this article that life assurance can be used to pay off debts like car loans, mortgages, student loans, personal loans and credit cards. If you have any of the debts we mentioned, your policy should large enough to cover them off in full including the interest.

  • Insuring others

You might want to insure some other persons in your life maybe because they are important to you but you should know that the life assurance should be for people whose death would mean financial loss to you just like the death of an income-earning spouse or partner which will bring about both emotional and financial losses to you.

You could also do this for business partners too with whom you have financial relationship as the death of the person will bring about financial loss to you or the company you both run.

Final Note

You should know that the best time to take up a life insurance policy is when you are young as it is harder to get insurance policies when you become older. So if you are younger, getting a life assurance policy will be cheaper but this doesn’t mean it would be easy qualifying for the policy.

So try to get insurance when you need it and also if you need it and do not worry about qualifying whether now or later in life as it is important that you get insured so as to have peace of mind and also for your loved ones to have peace of mind too.

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