Life Insurance

Dartmouth Life Insurance

Do You Have Enough Coverage Should The Worst Happen?

Few people want to think about death but if you have a family to take care of in Dartmouth, you must consider all possibilities. Life insurance is a smart decision but once you make that choice, you now need to figure out just how much insurance you need. Many people often underestimate their requirements and this can be a huge mistake. In fact, this kind of mistake could leave your loved ones out in the cold, should something happen to you. Here is information on policy types, determining how much insurance you need, and why this insurance is so important.

What Does it Mean to Insure Your Life?

After a person dies, they have no control over what happens to their family. However, when you purchase a policy on your life you can have control over these circumstances. That is the basic reasoning behind this type of insurance.

Are There Standard Life Policies?

Your situation may be much different than anyone else you know. In fact, you could have a number of choices when it comes to policies. For example, you can take out whole life insurance or term insurance, and it’s important to understand the differences.

Whole Life

A whole life policy is designed to last your entire or “whole life”. Once you start a policy it remains in force no matter what happens (as long as payments are made). For example, if you suddenly become ill or develop a serious medical condition, this will not affect your rates, and the policy cannot be canceled.

A whole life policy is also an investment. It accumulates value over the years. In time, you can borrow on its value and cash in the policy if you wish.

Term Life Insurance

Term insurance is sometimes referred to as “pure insurance”. In other words, there is no investment or accrued value. Your policy runs for a specific term and should something happen to you, it will pay. Term insurance is a common policy for loans, but they can also be used to protect your family. A term policy is cheaper than whole life, but once the term expires, it may be hard to get insurance if you have health issues or are elderly.

Figuring Out How Much Life Insurance You Need

You should take several factors into consideration when you figure out your insurance needs. For example, your assets, liabilities, future income, and final expenses, need to be included.

Assets

Start with a pencil and paper and write the word “assets” down. Next, list the value of your home and subtract the amount you owe on the mortgage. Remember to list other possessions and things of value. Include investments like retirement accounts, savings accounts, certificate of deposits, and other items. Include whole life insurance policy values also. If your mortgage has a life policy, you can count the entire value of your home as an asset, because it will be paid in full upon your death.

Liabilities

If you can no longer take care of your family (because you are not here) your debts still go on, and your loved ones will need money to pay them off. List all the debts that you currently have. If you have term life insurance on your mortgage or other loans, you won’t have to include these amounts. It’s also a good idea to estimate future debts that your family may incur.

Income

If you were to die today, how many years would your family need financial support? Add up the years until the kids are of legal age. Of course, if you want to provide a college education fund, include that too. If you are the primary breadwinner, your spouse may need to stay home with kids, and this needs to be a consideration also. Add up your income for the amount of years you will provide support and add in the other factors.

Death and Funeral Expenses

Even a simple cremation can cost as much as $2,000. A standard funeral with burial can be $8,000 or more, and this does not include things like mausoleums or elaborate headstones.

How Much Do I Need?

Here is an example of a 36 year old man with 2 kids and a wife. Let’s assume his mortgage balance is $125,000, and he owes $8,000 on vehicles. He also has another $5,000 in unsecured credit, $1500 in savings, and a RRSP worth $2500. Here is what he would need:

  1. Mortgage – $125,000 (no term life insurance on loan)
  2. Funeral arrangements $9,000
  3. Additional debt $13,000
  4. Yearly income – $57,000 for 11 years
  5. Assets – $100,000 home equity plus savings and RRSP
  6. University fund $120,000

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