Sometimes it can be hard to tell how much life cover you need when you first start considering life insurance, so figuring out whether you need to increase the amount is even trickier. This is especially true if your circumstances have changed dramatically - for either the better or the worse. How exactly do you tell whether your insurance needs have reduced, increased or simply stayed the same?
There are some signs that you should increase your cover amount to make sure your loved ones are provided for in the event of your death; here are five of the most common ones.
You’ve Had Children
With extra mouths to feed and kids to clothe, your expenses are definitely going to be on the increase. And equally as important is long term considerations, such as whether you’ll want them to go to University or if you want to provide something for them to be able to put a deposit on your house. Mostly, you’ll need to up your coverage so that if you pass away prematurely, you can cover their costs until they’re adults. This is especially true if you’re the breadwinner for the family, but is also true of stay at home parents.
Your income has increased
You don’t need to worry if your income has increased by the standard 5% to account for inflation or if you got a negligible pay rise. However, if you’ve landed a promotion or new job with a significant income increase or you took out your policy when you first started your career, it’s probably prudent to increase your amount of life cover.
This is because often, life cover is primarily designed to be a means of income replacement if you die. As your income has increased, you’ve probably adjusted to a different lifestyle and likely have a higher cost of living. There’s nothing wrong with this, but if your life cover amount won’t allow your loved ones to continue with this lifestyle, you’ll probably want to adjust your cover amount.
You have fallen into debt
It might seem like if you’re struggling with debt, now is the time to cut all your costs, including life insurance. Sadly, that would mean that if you were to pass away, your dependents could be left responsible for your debt. That's why dropping your life insurance when things get tough isn't normally a very smart move.
Instead, now is the time to increase your cover and cut costs elsewhere. If something happened to you, your life insurance would need to be able to cover all outstanding debts so that those left behind don’t have financial trouble in what is already a very difficult time.
You Got Married
With a brand new spouse in your life, you have someone else to consider in terms of finances. Luckily, there’ll be someone to share the load with if you run into financial difficulty. Having said that though, it also means that there may be someone relying on you financially, especially if they earn less than you, have stopped working in order to support your career, or you’ve jointly moved into a bigger house with increased rent or bond payments. If your life insurance payout wouldn’t be able to support a spouse the way that you could while you’re alive, it is time to consider upping your life cover.
If you’re nodding your head as you’re reading these, get on the phone to your insurer to increase your cover amount ASAP! MiWayLife can give you a competitive quote here.