Life insurance is meant to financially protect your dependents if you happen to pass away. Given this, just buying a life insurance policy won’t cut it. It’s important to also choose an adequate coverage and policy tenure to ensure your dependents aren’t left financially struggling in the future. Here’s how not having enough life insurance coverage can affect your family if something untimely happens to you.
Difficulty Paying for Day-To-Day Expenses
Your life insurance payout is meant to serve as an income replacement. So, if the coverage is too low, your family may find it difficult to pay for everyday expenses, in the absence of your income. This is especially true if you are the sole breadwinner and have multiple dependents.
Paying for End-Of-Life Expenses Becomes Hard
The average funeral costs upwards of $10,000 in the U.S. Given that most American families don’t have a large enough emergency fund or savings, your family may find it difficult to cover the cost of a funeral.
Long-Term Financial Plans Take a Hit
Opting for inadequate coverage or a short policy tenure may affect your family’s long-term financial plans. For instance, if you want to pay for your child’s tuition or you have a mortgage, you need to opt for enough coverage and for a policy that lasts until your financial commitments have been paid off.
Assets and Property May Be Seized
If you have a mortgage or other debts, it’s all the more important that you opt for sufficient coverage, so your dependents are not left having to foot the bill. Remember that if you don’t pay your bills, especially for secured loans like an auto loan or mortgage, the lender has the right to seize your assets or initiate foreclosure proceedings. If you don’t have enough money saved up to pay for your debts, your dependents may face an extremely tough time dealing with creditors.
Many Americans don’t have enough insurance to cover the financial needs of their loved ones. Remember that purchasing a life insurance policy is only the first step. Once you buy one, review the coverage at least once a year and increase the coverage if needed.