How Much Life Insurance Do You Need?
As you first start looking for insurance, you probably ask yourself, how much life insurance do I need?
The amount of insurance needed is quite dependent on your lifestyle and your financial circumstances.
According to a study done of life insurance policy holders, men and women had enough coverage for between four and five year's worth of annual salaries.
Most insurance professionals recommend at least seven to ten years of annual salary value.
When asking, how much life insurance do you need, you do have to consider your goals for this type of insurance. Consider the following questions.
- Do you want your family to be able to pay off your mortgage loan if you die before it is paid off? If you pay rent, how long do you want them to be able to pay the rent to remain living in their home?
- How much money do you want your family to have available to pay off any existing debt? This may include debt from credit cards, student loans, personal loans and car loans.
- How much money do you make annually? How much of your annual income do you want to be available to your family each year after you die?
- Do you want to set aside any funds for funeral costs?
- How much money do you want to put aside to fund charity gifts or to pay for special financial circumstances, such as to pay for a disabled child?
- How much money do you want to set aside to pay for your children's education?
- Are there any other needs you would like life insurance to cover?
As you can see, these are often difficult decisions. Still, as you consider all of your needs, you can get an estimate of what the best amount for your family will be.
Amounts to Subtract From Your Need
The next step in answering that question is to examine any assets you currently have.
If you have a retirement accounts, other savings, etc, this may help to offset some of these coverage needs.
Examine your current financial needs based on what you have available to your family should you die.
In addition, you do have to take into consideration what you can afford in premium payments.
If you are unsure of the amount of insurance you need even at this point, there are online calculators that can help you to figure it out.
How much life insurance do you need? The answer is very much a personal decision.
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