Life insurance is one of the most important financial safety nets you can have if you want to protect the people you love. It ensures that your income is replaced and your family’s needs are met if something unexpected happens to you. But simply having a policy isn’t always enough — the amount and type of coverage you carry should evolve as your life changes.
If you’re wondering whether your current policy is really adequate, here are five signs you might be underinsured:
1. Your Only Policy Is Through Work
Group life insurance from your employer is a great starting point, but it’s rarely enough on its own. These policies often provide coverage equal to just one or two years of your salary — far less than what most families need to pay off debts, maintain their lifestyle, or cover future expenses like college tuition.
There’s another catch: your coverage typically ends when your employment does. If you change jobs, retire, or are laid off, your policy disappears. Securing an individual life insurance plan that stays with you regardless of employment gives you more control and often more robust options, including permanent policies that can build cash value over time.
2. Your Income Has Increased
A bigger paycheck usually means a bigger lifestyle — and bigger responsibilities. If your salary has significantly increased since you first bought your policy, your coverage may no longer match your family’s financial needs. Without adjusting your policy to reflect your current income and expenses, your loved ones could face a sudden downgrade in their standard of living if you’re no longer there to support them.
3. Your Stay-at-Home Partner Isn’t Covered
It’s easy to overlook life insurance for a spouse who doesn’t earn an income, but their contribution has real financial value. Childcare, household management, and other responsibilities they handle would all come with a cost if they were gone. Securing a policy for a non-working spouse helps ensure that those vital services can continue without creating a financial burden.
4. You Welcomed a Child
Adding a child to your family dramatically increases the amount of coverage you need. The average cost of raising a child exceeds $21,000 a year — and that doesn’t include college tuition. If your policy hasn’t been updated since becoming a parent, it might fall short of covering essentials like food, housing, healthcare, and education for your children. Even one child can significantly increase how much life insurance you need.
5. You Bought a New Home
A mortgage is often the largest debt a family carries, and it doesn’t disappear if something happens to you. If you’ve purchased a new home since buying your life insurance, your coverage might not be enough to cover that larger financial obligation. Increasing your policy ensures that your loved ones can stay in their home and continue making mortgage payments without added financial stress.
Final Thoughts
Life insurance isn’t a “set it and forget it” type of protection — it should grow and change as your life does. Major milestones like a salary increase, a new home, or the birth of a child are all signs that it’s time to revisit your policy. The right amount of coverage offers peace of mind, knowing that no matter what happens, your family’s financial future is secure.
