Staff Writer, Life Quotes, Inc.

Everyone knows that a  life insurance policy protects your loved ones if you should die prematurely, but you may not be fully aware of everything a life insurance policy has to offer. There are many ways you can use the proceeds of a life insurance policy, and not all of them are immediately obvious. You may find the following list surprising.

Cash to meet daily living expenses. Life insurance can help maintain household bills such as  your mortgage, utilities and car payment, coupled with groceries and other necessities. Brian Ashe, spokesperson for the LIFE Foundation, says that the general rule of thumb is to purchase a policy with a death benefit that is 10 times your annual income.

“Life insurance has to be sufficient enough to replace 60 to 75 percent of the policyholder’s pre-death income,” says Ashe. “The money has to last the family a long time, or at least until the youngest children become self-sufficient.”

For example, if your income is $100,000 annually, in order to provide income to your family that is equal to the lifestyle they are accustomed to, Ashe suggests purchasing a policy with a $1 million death benefit. Nevertheless, Ashe notes that in recent years, some insurance experts have raised that number to 12 to 15 times the policyholder’s annual income.

“The current interest rate environment is the reason behind the increase,” explains Ashe. “When interest rates are lower, your interest-earning capabilities will also be lower, so you’re going to need more capital. The money generated by the life insurance benefit can only be invested safely in a stock instrument that has a much lower rate of return, so you have to compensate by having a larger pool of money in the death benefit.”

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