So, you've decided that you want to get life insurance for your family. Great, now, how much coverage would you like? You have no idea, do you?
This is completely normal. There are many variables to think about when trying to determine the right amount of coverage for your needs. Sometimes the very thought of trying to figure out your ideal coverage amount can be overwhelming.
We've created a helpful guide here that will help organize the most important information to consider when figuring out how much coverage you need. Let's take a closer look at the three key areas you should focus on when narrowing down your ideal life insurance coverage amount.
The easiest place to start is with your current savings. Think about what is current in your savings accounts across every financial institution you work with, and note how much you have in each. Next, look into any investments you currently have. These investments could be:
Make a note of funds in each of your investment accounts and keep that number near your savings accounts number. Finally, look into your current life insurance coverage if you have a policy. These could be plans you purchased years ago before you had a family or a spouse.
It is important to know the amount of current coverage you have and see how that amount compares to your immediate needs now. These could be term life insurance, final expense insurance, or a permanent life insurance plan. Once you have these savings figures, it is time to think of the future and your expected expenses.
When considering these figures, we're going to be looking at future needs. We typically like to start with one of the most significant financial obligations for people, their mortgage. Look into how much is left on your mortgage and note that number. If you don't have a mortgage, take your rent into consideration and how much that can cost you in a year.
Next, consider any other current debts you have, including:
If you have children or are planning to, you should also consider their education fees. To help with this estimate, consider using $10,000 to $15,000 per child per year less any current education savings.
You should also note your final expenses at this stage. When you pass away, who will cover the costs associated with your final expenses? In order to avoid leaving your family with debt, ponder what you would need for your funeral expenses. Be sure to consider the cost of burial, ceremony, final taxes and debts, estate fees, lawyer fees, among others.
Finally, note other future expenses like children's weddings, childcare, and emergency funds. These are significant expenses that would be a large undertaking for your spouse or partner to take on by themselves.
The final of our three pillars for planning your ideal coverage amount is ongoing income needs. Begin by considering how much annual income your family would need to continue meeting their financial obligations. To help with this figure, try using 60%-70% of your current annual income in your plan.
Once you have that figure identified, consider how long your family will need this income in years. For another estimate, try to determine the number of years until your children become independent adults or the number of years until retirement.
With all these figures now recorded, the next step is to use a life insurance calculator to get an ideal estate of your insurance coverage amount.
With these amounts and figured collected, it is time to calculate your ideal life insurance coverage. Using intuitive and simple tools like our term life insurance calculator, you can easily determine coverage amounts without having to do any complex calculations.
Input the data from the three key areas we spoke of above into their fields in the calculator and hit the calculate button. Our tool will outline your total liability cash needs, the amount of income needed by your survivors, total asset amounts, and finally, the total amount of life insurance required to meet your cash and income needs.
Once you have identified your ideal coverage amount, you should speak to a licensed life insurance professional. At Termforme.com, we are a life insurance company made of expert life insurance advisors united in the goal of making term life insurance more affordable and accessible than it has ever been before.
There are no doctor visits or face-to-face meetings with agents when you apply. There are also no lengthy waiting periods when you wait for your coverage to be issued. You can get up to $750,000 in affordable and comprehensive term life insurance coverage now.
To discover your options and get a free no-obligation quote, complete our short online form now to get started!
Written by: Adam Bianco