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 Life Insurance Scenarios

Life Insurance Scenarios is all about how life insurance can help you out in different areas of your life. For example, it will help you to replace lost income from a catastrophic event related to work or school, provide for your loved ones during your absence due to a long-term illness, protect the assets of the whole family if you die prematurely, and provide financial security for yourself and your dependants.

With these benefits in mind, it’s important that everyone own at least some form of life insurance protection. But how much and what type of coverage is right for you?

How Much Life Insurance Do I Need?

The answer to this question is, it depends. It depends on your financial situation and goals, the number of dependants that you have, your plans for the future, how much life insurance coverage you already have or can get from other sources, and on the cost of purchasing life insurance versus the cost of not having it (e.g., lost income).

To help you determine how much life insurance is best for you to be sure that you have enough protection to last through all eventualities visit our Life Insurance Calculator.

Many people purchase some form of life insurance to protect both their health and their assets if they die prematurely. If a dependent child dies before you, you could be entitled to financial support from the dependents benefit. You might also be entitled to claim life insurance proceeds in the event that your own death occurs prematurely.

The all-important question then becomes whether you need more than a government sponsored national health care plan combined with a term life policy or other supplemental long-term policies provide for your dependants. A good place to start is by checking out our table of Life Insurance Scenarios which will tell you how much coverage you may need.

Life Insurance Scenarios Table

Dependent Status Scenario 

Financial Situation/Goals 

Term Life Coverage Need (years) 

Husband

Wife

Child(ren)

Other

Single, no dependants To cover the mortgage payments. 10–20 10–20 10–20 None needed Husband + wife (no children) To cover the mortgage payments. 20+20+15= 45 years. Total insurance coverage should equal year before death multiplied by 5. In this example the total insurance coverage should be 45 x 5 = 225 years. Husband + wife (no children) To cover the mortgage payments. 10–20 20–40 10–20 None needed 

 Husband + wife (no children) To build savings. 10–20+10–20=60 years. Total insurance coverage should equal year before death x 5. In this example the total insurance coverage should be 60 x 5 = 300 years.

How much life insurance do you have? If you don’t have any, a term life policy to provide for dependants is a great way to start your protection. If you don’t have enough coverage, it may be a sign to review your goals to ensure that you have sufficient insurance in place.

What Kind of Life Insurance Is Right for Me?

The type of life insurance protection that is best for you will depend on your particular circumstances. Family life insurance policies offer different kinds of benefits and methods of payment. The benefits and methods available are listed below:

Reviewing the scenario table above, if a dependent child dies before you or a spouse, their children could be entitled to financial support from the dependents benefit. You might also be entitled to claim life insurance proceeds in the event that your own death occurs prematurely.

Long-Term Care Insurance

Life insurance also plays a part in providing for your future care. Long-term care insurance is available and can provide protection against long-term care expenses, which are rapidly rising and could put a big dent in your retirement nest egg. It can be an important part of an overall wealth protection strategy for people who are concerned about being able to cover the costs of long-term care. In addition, it provides peace of mind for those who have already used their retirement savings on health care. However, while long-term care insurance is vital to many people’s planning, it may not be the best choice for everyone who needs help with their health and personal-care needs.

What Is Life Insurance? 

Life insurance is one of the most complex and misunderstood financial products in the life insurance industry. Most often, life insurance is defined as a “death benefit” or providing a death benefit to someone else. However, there are many other important features of life insurance that you should consider when purchasing coverage. You should use the term "life insurance" for protection from unexpected death and not just because it comes with a "death benefit." The reason for this is that although you hope to never need it, for anyone who has family to support and a financial legacy to leave behind, life insurance can play an important part in building both assets and securing your family's future.

There are many different types of life insurance (term, whole, universal, variable etc.) and each one offers different features and benefits. The type of life insurance you buy will depend on your financial situation and goals. There are some things to consider when purchasing a life insurance policy including premiums, the policy term (amount of time that you're covered), how much coverage you'll need and how long your beneficiary will have to wait before they receive the death benefit payout. The best way to maximize the protection you receive is for you to use our Life Insurance Calculator.

Life Insurance FAQs

Is life insurance the same as income insurance, savings account, or home and auto insurance?

No. Life insurance can be thought of as a part of your overall personal financial plan and is often compared to an investment that pays a guaranteed return that is always paid. The payout period for life insurance varies depending on the type of policy purchased. Policy terms ranges from three months up to 20 years. For example, the length of time that coverage will be in place could expire before a life event occurs (i.e. someone's death). It is important to purchase the type of life insurance policy that best suits the needs and goals you have.

What are some specific benefits of life insurance?

There are many benefits of purchasing life insurance, including death benefits, which provide a financial benefit for your beneficiaries; cash value that pays out over the policy term; and income protection coverage for your beneficiaries. A life insurance policy can also give assurance to your family in the event of unexpected circumstances. If, for example, someone dies suddenly or unexpectedly, there is enough paid out in cash on a life insurance policy to provide funding for their pending funeral expenses or payments to help with their health-care costs.

Conclusion

Life insurance can play an important role in your overall financial protection plan. By understanding the different types of life insurance available to you, and how each policy can benefit your family, you'll be able to choose the right coverage for your needs.

What if my parents don't have enough life insurance? What should I do?

This is a very common concern among children of older parents. The best time to purchase life insurance is when you are young and healthy with a long time before retirement. Unfortunately, not everyone realizes that early enough in their lives.