Greensboro Life Insurance: When and Why to Buy More

There are many reasons you could probably come up with for buying life insurance. One of the more commonly cited is because a college friend, recently recruited into the insurance business is making his rounds pitching policies to all his friends and you happen to be one of them. In this case, you could say you didn't really buy life insurance as much as it was sold to you.

But whatever your motivation for taking the plunge - maybe you've recently married and want to provide financial stability protection for your spouse or you've just taken out a mortgage for a new home and don't want to leave that financial burden to your family in the event of your premature death - taking out a life insurance policy is always a selfless act.

The only real benefit you'll ever get as the named insured is the peace of mind of knowing you're looking after the welfare of your policy beneficiaries. In reality, life insurance could more aptly be termed "death insurance," as its main purpose is to pay out financial benefits at the time of death, which is money the insured will never see. One thing's for sure - everybody dies. This means every in-force life insurance policy will eventually pay out a death benefit to the insured's beneficiaries. The only unknown is when this will occur.

When and Why to Buy More

As in the previous example, buying your first policy from an old college buddy, the face value of such coverage is typically something small such as $10,000. In the event of your death early on, this may be just enough to cover your funeral costs, relieving your beneficiary of the financial hardship of having to take on these costs.

As time goes on, however, and you get married, have a couple of kids, take on a home mortgage, car payments, credit card debt and other financial obligations, the amount of money needed to settle your affairs in the event of an early, untimely death will be much greater. At each of these milestones, taking out additional life insurance coverage is something you must consider. If you were to die tomorrow, how much would it take to pay all your outstanding debts and provide sufficient income to keep your family financially secure and educate your children? This is the amount of life insurance you should be carrying right now.

How Much Umbrella Insurance Do I Need?

Most people are familiar with homeowner's insurance because, if they have a home mortgage, their mortgage lender requires they carry enough homeowner's coverage to protect the lender's financial interests in the event that the home were to be destroyed.

They also know something about auto insurance because nearly every state requires drivers to carry a minimum amount of automobile liability coverage and some, including North Carolina, also require you to carry uninsured driver's insurance in case you're in a car accident that's caused by someone without the required insurance in force.

Umbrella Insurance

Umbrella insurance, however, is something you may not be familiar with because no one requires it and, since insurance agents make minimal commissions when writing an umbrella policy, it's generally not a sales priority. Umbrella insurance also must be taken out in conjunction with your homeowner's and auto insurance policies, and usually written by the same company that carries those two policies for you. Unfortunately, it's often not even brought up by an insurance agent and you'd actually have to ask about it to get the needed information regarding the basics of this type of coverage.

Umbrella insurance is protection against liability for which you are held responsible that goes beyond the amounts covered by your homeowner's and/or automobile insurance policies. It covers you against liability claims of property damage and bodily injury or death, taking up at the point where your homeowner's or auto insurance maximum coverage amounts have been surpassed. Umbrella insurance also protects you from the effects of being sued for slander, malicious prosecution, libel, false arrest or mental anguish.

How Much Protection Do You Need?

Even if a potential plaintiff has a legitimate liability case, it's doubtful that it will be brought to court if the defendant has few assets. Going after someone with limited assets doesn't make since with little to gain even if the case is won.

If you're wealthy, however, the likelihood of being sued increases exponentially since, with "deep pockets," you may be subjected to even frivolous lawsuits. Experts recommend that, when your assets total $300,000 or more, an umbrella policy of at least one million dollars makes sense, with two million being even more appropriate.

Statistics show that approximately 12% of typical homeowners carry umbrella insurance. For wealthy homeowners, that figure increases to 50%. For those worth $5 million or more, nearly 80% carry an umbrella policy.

How Much Life Insurance Does a Single Parent Need?

A 2011 study found that approximately 70% of single parents are living without life insurance coverage (University of Virginia's Darden School of Business). This is in spite of the fact that single parents are possibly the one group that's most in need of this type of insurance coverage due to the vulnerability of their children's welfare in the event of an untimely parental passing. Whether you currently have no life insurance coverage or you're wondering if the coverage you have is adequate for your requirements, we have some information that can help determine just how much life insurance you likely need.

How Much Income Must Be Replaced?

As a single parent, if you were to be taken away from your family through a premature passing, the amount of income you're currently producing may need to be replaced in order to allow your kids to continue their lives in some semblance of financial normalcy. The current age of your children should be considered as well as the financial condition of your chosen guardian.

If the kids will be going to a family member who is relatively financially secure, the amount of life insurance you now carry won't need to be as much as if they'll be going with a guardian for care without enough current income to deal with the additional expense associated with taking care of your children. A commonly accepted rule of thumb says the face amount of your insurance policy should be equal to at least half the amount of your current annual salary for the total number of years until your children reach adulthood and are able to financially fend for themselves.

If you see college in their futures, this amount would need to be increased. You'll also have to factor in an amount equal to your funeral and burial costs and all of your outstanding debts, since creditors will likely go after your estate to recoup this money, and this will happen before any death benefit payouts go to your beneficiaries.

How Much and What Type of Insurance  

                                       

For a single parent, a balance must be made between the need for X amount of life insurance coverage versus the ability to pay the premium on this amount of protection. The best option is to buy term insurance, which is more affordable than whole life, and to take on a premium payment you know you can handle.