A death benefit that once made sense could become too small over time.
- Life insurance coverage is intended to protect loved ones.
- In some cases, life changes necessitate a larger death benefit.
- There are several reasons why buying more insurance coverage could become necessary.
Life insurance coverage is important for most people. The policies may pay out a death benefit after the covered person dies. Family members may rely on this money to pay the bills the deceased person used to cover, or to pay for services the deceased provided.
When buying a policy, the policyholder must decide how large the death benefit should be. And in some cases, the size of the death benefit will need to increase after the policy has originally been purchased. Here are three situations when increasing that coverage may become important.
1. Getting married
Most people take on joint financial commitments when getting married. This could mean shared debt, such as mortgages or car loans. And people also get used to a certain standard of living based on their combined income with their spouse.
When someone new depends on a policyholder’s income, this is a clear situation where more life insurance is necessary. Buying additional coverage could enable a surviving spouse to stay in a shared home, pay off joint debt, and continue living the type of lifestyle the couple enjoyed after getting married and combining finances.
2. Taking on new financial responsibilities
When a person dies, their financial responsibilities do not necessarily die with them.
If an individual borrowed a lot of money, for example, creditors could make a claim against his or her estate to try to recover the unpaid funds if the debt has not been paid off upon a death. Or if someone started paying nursing home fees for aging parents, the nursing home isn’t just going to stop charging upon the paying-child’s death.
No one wants their entire estate to go to creditors, and no one wants to leave their responsibilities unfulfilled. As a result, it’s a good idea to increase life insurance coverage when making new commitments.
3. Having a child
Having a child means taking on substantial additional expenses. Children are very expensive to …….