A first time life insurance purchase should be viewed as a major investment in the future as life insurance helps survivors maintain or regain their financial footing following the death of a significant breadwinner.
When purchasing life insurance it is important to view the monetary loss a family would encounter following the demise of the major breadwinner(s).
Several questions must be asked to ascertain the amount of life insurance needed for the family’s needs.
How would the loss of income generated by the breadwinner affect the quality of life for the survivor(s)? Does the earner have and/or support children? Their needs must be included in the life insurance policy as they are minor beneficiaries.
Does the earner have a spouse? Does the earner own real estate? Wealth, be it human (spouse/children) or material, must be considered when life insurance is purchased. There should be allowances made for those who, during the earner’s lifetime, depended on his or her income.
When making the choice of what policy is right for the first time buyer, try to determine what amount of life insurance necessary to provide the quality of life enjoyed by the beneficiary and buyer presently.
The best choice for life insurance is not always the cheapest as insurance is sold in increments, usually in tens of thousands. While a $50,000 policy might meet the needs of Family A, that same dollar value policy might not suffice for Family B whose needs far outweigh Family A.
For example, Family A might need to pay off a house with a mortgage of 35,000. The funeral or burial arrangements might cost $15,000. In this case, a $50,000 policy might suffice; however Family B, in addition to their primary residence, might also have a vacation home, a boat, several college loans and a remodel on the primary home to repay. Briefly, Family B has larger debt, bigger bills and requires a larger policy to cover remaining bills following the demise of their primary breadwinner and would be wise to purchase a larger policy than Family A whose needs are comparatively minimal.
The first time life insurance purchaser must adopt an eye on the future, albeit, realistic view of what expenses must be paid following the death of the insured. In this manner, he insures the financial well-being of his survivors.