Life insurance is a critical means to make sure our loved ones are taken care of should anything happen to us, particularly (but not only) if we are the breadwinner for our family.
This could be our worst nightmare.
Our spouse, who is the sole breadwinner for our family, has suddenly passed on. We have few assets and little savings. Can we imagine the thoughts going through our heads…
“How can I pay the bills? Where will my children and I live? What will happen to my children’s education?”
"We must ensure there is a replacement of our lost income to help continue the established standard of living due to an unexpected departure."
Life insurance is something most people would prefer not to think about or discuss.
That's not surprising since most people don't like talking about money or mortality anyway. But these are precisely the reasons life insurance is so important. Life insurance is a critical means to make sure our loved ones are taken care of should anything happen to us, particularly (but not only) if we are the breadwinner for our family. If we have dependents and/or significant debts, then we should ALWAYS have enough coverage in place for our dependents to survive beyond our demise. We must ensure there is a replacement of our lost income to help continue the established standard of living due to an unexpected departure.
The question now is how much coverage we should consider to insure.
The general rule of thumb in the life insurance world is to insure about 5-10 times our annualised income. We may also want to keep these factors in mind in order to assess our insurance requirements:
What percentage of our income needs to be replaced?
How many years will this income need to be replaced?
Do we have any debt? (Mortgage, car loan, credit card, etc.)
Are we funding our children’s future education?
What is our expected final expenses? (Funeral costs, medical bills etc)
The single biggest advantage of having adequate life insurance coverage is the peace of mind obtained by knowing our dependents would not be facing a host of financial issues should something unfortunate happen to us as breadwinners.