Necessities Of Life
What Does Necessities Of Life Mean?
The necessities of life refer to basic needs such as food, clothing, shelter, sleep, heat, and anything else essential for survival. Most of these items require money to obtain and are often insurable. For instance, one can insure their shelter (home insurance), clothing (contents insurance), or health through an insurance policy.
In most cases, insurance companies provide coverage for these necessities when a loss occurs. If a covered home is damaged in a fire, for example, insurance will pay to rebuild the house and typically reimburse the homeowner for any additional shelter costs, such as hotel rooms, during displacement. Life insurance provides financial support to survivors, ensuring they can meet the necessities of life after the policyholder’s death.
To secure these necessities, one needs a source of income. However, income can also be insured, ensuring access to life’s essentials even when one is unable to work. Types of insurance that cover this include:
Similarly, disability insurance and workers’ compensation provide a certain level of income if an individual is injured or ill and unable to work.
Insuranceopedia Explains Necessities Of Life
The necessities of life are at the bottom of Maslow’s hierarchy of needs, which outlines the basic requirements necessary for survival. Above these physiological needs are safety needs, such as financial security and physical safety, both of which can be protected through insurance. Above basic survival needs are love needs (forming relationships with others), esteem needs (feeling accomplished), and self-actualization (achieving one’s full potential).
In legal contexts, the “necessities of life” are often referenced as the essential requirements that a legal guardian must provide for a minor or anyone unable to care for themselves.
When purchasing a life insurance plan, the coverage amount should be enough to ensure that the surviving loved ones can meet their necessities of life. This amount can be calculated by determining the current annual cost of providing for the family, including rent/mortgage, food, clothing, medication, etc. Then, multiply the total by 10 to 15. This ensures that the family can be supported for 10 to 15 years after the policyholder’s death (allowing for inflation). This method of calculating life insurance needs is known as the “needs-based approach.”
Life insurance should also be sufficient to cover funeral expenses, so survivors can use the remaining funds from the policy for life’s necessities. Many people overlook the cost of a funeral and related expenses when planning. For example, the family may need to pay legal fees to transfer property titles. Any additional costs can reduce the funds available for the necessities of life.
