Everybody needs a different amount of life insurance based on their own situation. But it 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.)
Calculation 1:
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.
Calculation 2:
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.
Calculation 3:
Perhaps nothing is easier than a life insurance calculator, which is why we developed our Life Insurance Needs Calculator. Just answer a few questions to get an idea of how much life insurance to buy.
CALCULATOR
Life Insurance Needs Calculator
Answer a few simple questions to estimate the amount of life insurance coverage you need to take care of your family.
This is an estimate only. For a complete assessment, contact a qualified insurance professional.
Get the Coverage You Need
One of the best ways is to work with a licensed insurance agent who can walk you through the entire process. JF Insurance’s Matt Becker is here to help! You can contact him at 262-728-2631. The key is to start today.
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Tags: Family Protection, LIAM2020, Life Insurance