Life insurance is a big decision — but once you decide you need it, how do you know how much of it you need?
What is Life Insurance?
Life insurance takes small monthly payments and turns them into a large payout. The monthly payments are called premiums, and how much you pay depends on a number of factors. For instance, the older you are, the higher your premium.
The payout is called your death benefit. When you purchase a life insurance policy, you and your insurance provider agree to an amount that will be paid out when you, the policyholder, pass away. This money will go to your beneficiaries, people you trust to use the money to cover your end-of-life expenses like funeral planning and mortgage payments.
Deciding Your Death Benefit
The decision when it comes to the death benefit, then, is how much do you need? Your death benefit is your main source of coverage. Some life insurance policies provide funds for you to use while you’re living, but the whole point of life insurance is the death benefit.
The type of life insurance policy is the first factor in determining how much life insurance you need, i.e., how to set your death benefit. For instance, whole life insurance policies can range more than $1 million, while final expense policies offer options starting from $2,000.
When deciding, first know the limits of your policy. Then, ask yourself, “what expenses will I leave behind?” It’s not an easy question, but your answer will determine how much life insurance you need.
For instance, if all you want to take care of before you pass is your funeral and burial, you probably only need about a $10,000 policy. On the other hand, if you support a family who relies on you for their daily expenses, place to live, etc., you may want a policy anywhere between $200,000 and $1 million.
This is a great conversation to have with an insurance expert, like the ones here at Kannonball. We know life insurance, and once we get to know you and your needs, we’ll be able to put you on the right track towards the perfect amount of coverage.
Considering Other Factors
You’ll also need to consider the cost. Each life insurance policy has its own price point, and generally, the more coverage you purchase, the higher your premium.
Term life insurance is one of if not the most affordable option, with policies anywhere from $100,000 to $500,000. Whole life insurance premiums tend to be higher, but they offer higher policy amounts and living benefits for you to build upon and use. Qualifying is another major factor — if you have health concerns or are over age 65, you will want a final expense policy.
Life Insurance is Better with Kannonball Insurance Solutions
There are plenty of ways to decide how much life insurance coverage you need, but the easiest way is with Kannonball — call (254) 918-5444.