Congratulations, you got a big raise! After you are done celebrating you should sit down and think about what you’ll do with all that extra income. In addition to going on a nice shopping spree, this is also the ideal time to increase your life insurance coverage.
Getting a raise means that your family will likely enjoy an upgrade in their current standard of living. Once their standards are higher, they’ll need more coverage to help them maintain the same lifestyle in case something happens to you.
While the hope is that you’ll go on to live a long, healthy life, it’s important to be prepared for the worst-case scenarios.
How Much Should You Increase Your Life Insurance Coverage?
The actual amount of your coverage increase depends on a few factors:
- Your total income – You may have gotten a big raise but that doesn’t mean you’re a millionaire. How much of a raise did you get?
- Where you live – The cost of living varies by location.
- How much your family needs to live on – Pull out your calculator for this one. It may be tedious, but it’s extremely important to figure this out.
Once you have all your information at hand, you can arrive at a coverage amount that seems reasonable.
How to Increase Your Life Insurance Coverage
There are two general options and you can either increase your current policy or buy a new one. Now, not all policies can be increased. This is something that you’ll need to check with your insurance carrier. (And if you haven’t yet bought life insurance, it’s important to look for a policy that can be increased.)
Increasing your current policy is usually the best option, since your health conditions may have deteriorated since you originally purchased it — and that can mean higher monthly premiums. However, if you can’t increase your coverage, you can either cancel the current policy and buy a completely new one or continue with your current policy and buy a supplementary policy.
If all this sounds complicated, it is. While calculating your monthly expenses is one thing, it’s another thing entirely to determine what’s the more financially worthwhile route when it comes to policies.
At this point, it’s important to consult a professional about which option makes the most financial sense for your situation. We’re not talking pennies; we’re talking thousands of dollars over a policy’s lifetime.
Sproutt insurance advisors are available to help you determine what’s the best option for you. Sproutt is not affiliated with any specific insurance company, which means that you can be confident that the advice you will get is unbiased. Simply answer a few questions and we will find the best-value plan for your lifestyle, needs, and budget.