Everybody needs a different amount of life insurance based on their individual situation. But it basically comes down to how much money your loved ones would need to remain on firm financial ground if your earnings were no longer in the picture.
To get started, it helps to consider a few questions like:
- Who do I want to protect? Common answers include a spouse or partner and children, but your list may also include siblings, aging parents and more.
- How long would they need financial support? Consider the ages of everyone who depends on your earnings.
- Is anyone disabled or have other special needs? It’s important to remember that some people may need lifelong support.
- How much debt do I have? You’ll want more coverage if you have a mortgage, auto payments, credit card debt and other outstanding loans.
- How much savings do I have? Factor in all of your savings and investments and how liquid they are—some investments like real estate cannot instantaneously be converted into needed cash.
- Were you planning on contributing to a child (or children’s) college education? If so, you’ll want to up your coverage level.
- Will my spouse or partner need help with funding his or her retirement? If so, more coverage is needed than if he or she is fully funding his or her own retirement.
Three Easy Ways to Estimate Your Need
There’s no way to know the exact dollar amount your loved ones would need if you were to pass away.
But there are three easy ways to get an estimate of what that amount would be. (Keep in mind that experts recommend erring on the side of caution and buying a little more life insurance than you think you may need.)
One of the simplest ways to get a rough idea of how much life insurance to buy is to multiply your gross (a.k.a. before tax) income by 10 to 15. Another popular formula recommends adding $100,000 to that amount for each child’s college education expenses.
Another way to get a ballpark figure of how much life insurance to buy is to calculate the following:
- Add up the immediate, ongoing and future expenses your family or loved ones would incur if you were to pass away. That could mean everything from funeral costs to rent or mortgage to college tuition.
- Add up the financial resources your loved ones already have. That could mean a spouse’s income, savings, investments and life insurance that’s already in place.
- Subtract your financial resources from the anticipated expenses. The difference between the two numbers is the approximate life insurance to buy.
Reach out to us today to help you calculate how many life insurance you need for you and your family, 330-867-3140 or firstname.lastname@example.org!
Article Source: Life Happens