Over the years, life insurance companies have been increasing the payout amounts of the different kinds of life insurance plans. Before you sign up for that million dollar life insurance plan, you have to examine your needs and your financial situation. Some people need a LOT of life insurance coverage while some people need none at all.

Life Insurance is for the Living

When you take out a life insurance policy on yourself, you have to consider the beneficiaries and what their needs will be when you die. If you're the sole supporting person in your family, for example, then a larger plan is a good idea.

What if you don't have any family? If you don't have any family, do you really care what happens to your lifeless body when you're gone? My best friend in the US is in that situation. He has no family and he's already in his upper fifties. He also has no life insurance policy. He doesn't care what they do with or to his body when he's no longer using it.

When my father-in-law died in 2003, I found out he had two life insurance policies. One was for $10,000 through the Knights of Columbus and the other was for $50,000 (I don't remember which insurance company it was at the time). My father-in-law had named a daughter in the Philippines as a beneficiary for the first one which ended up being the first one paid out and it covered his viewing in the US, shipping the body to the Philippines and his burial at a local memorial park. The Knights of Columbus, the director of the mortuary and I managed to get the appropriate faxed signatures to authorize the payment to my wife so nothing came out of pocket. My father-in-law's dependents did not rely on him for financial support, they relied on me (and that's a different story altogether).

If your beneficiaries do not rely on you for support, does it make sense to take out more life insurance than you need for the cost of the funeral and burial? Simple funerals are still under $50,000 in the US, so it may not make sense to take out a large policy. That is, unless you intend for your beneficiaries to be well off.

Life Insurance Used for Other Purposes

It's beyond my knowledge to write about the various kinds of life insurance. There is one particular kind, and I don't know which kind it is, that builds an annuity or you to use when you retire. There are other kinds that you can borrow against instead of taking out a personal loan.

Unlike health insurance, which is really a necessity that comes with rising medical costs, life insurance is optional.

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