4 Signs You Need More Life Insurance Than Most People

It's important not to end up with too little insurance coverage. 

Deciding how much life insurance to buy is an extremely important decision. A death benefit pays out when a covered policyholder dies, and if the death benefit is too low, surviving loved ones could be in dire financial straits upon the policyholder's untimely death. 

While anyone who has someone depending on their income or their services should have coverage, the amount of protection necessary can vary dramatically. Here are four signs life insurance buyers should look out for that suggest they may need more coverage than most. 

1. Having a lot of debt

When a person dies with a lot of debt, their estate may be obligated to pay off the outstanding balance due. This can leave much less money in financial accounts for loved ones. Say, for example, a deceased person has $10,000 in their bank account but owes $20,000. Creditors can come after the estate to collect the $10,000 and potentially collect other assets to pay off the balance due. This could mean personal property the deceased wanted to leave for loved ones ends up being sold to satisfy creditor claims. 

If a person dies with cosigned debt or jointly-held debt, things may be even worse. The co-borrower or cosigner will still be responsible for paying the balance in full. This could lead to a lot of financial stress without income from the deceased. 

This is why those with many outstanding bills should consider getting a larger amount of life insurance so money is available to pay the balances off in full. 

2. Living with a spouse that doesn't work

In two-income households, the death of one spouse does not mean all money coming into the house stops. But that's not the case when the partner left behind does not work. Often, if someone has been out of the workforce for a while, it can be difficult for that person to just go get a job if they need to after a spouse's death. 

To make sure a stay-at-home spouse is appropriately provided for until they can find work, or to allow them to continue to stay home, it could be necessary to buy a much larger amount of insurance coverage. 

3. Having a large mortgage

Mortgages are secured debt and still must be paid after a death if surviving family members want to keep the house. Many people often want their spouse or other loved ones to be able to remain in the family home. That means those with large mortgages may want a big death benefit so there's money available for the home loan to be repaid. 

4. Earning a high income 

High income earners often have family members who are used to living a certain lifestyle. Their death could make that impossible if their income stops. To ensure loved ones don't have to endure a serious lifestyle downgrade, buying more insurance could be needed.

Essentially, it's important to consider obligations to loved ones when deciding whether buying a large amount of life insurance is necessary. It's better to have enough coverage rather than to pass away with too small a policy and leave those you love without the funds they truly need.