4-Step Guide to Calculate Your Life Insurance Needs
Reader’s Question:
How do I know if I’m buying the right amount of life insurance? This is my first time to do this.
Ikaros
Tampa, FL
Life insurance is one of the most useful financial tools one can own. Having the right amount of coverage is essential for the financial well-being of your loved ones should you suddenly pass away. Here is a life insurance calculator guide to help you out:
Step 1: Estimate Costs of Death
You wouldn’t want to leave your loved ones with the burden of burying you. Include the total funeral and burial expenses that you believe it will cost.
Step 2: Money to Clear Long Standing Debts / Loans
You should also factor in any long term financial obligations you, your spouse, or your family has taken in. This will include money to pay-off debts, loans, and mortgage. You should also allocate enough money on your coverage for future needs like college tuition.
Step 3: Survivor Living Costs / Years of Need
This is probably the most important aspect to consider when calculating your life insurance coverage. You want your family/dependents to still be able to life the lifestyle that they’re accustomed to after you are gone. A good rule of thumb is to buy coverage that can replace your annual income at least ten times over.
Step 4: Cover other Assets
Don’t neglect the other assets that you and your family have. This would include any business on the side that is still providing income as well as non-monetary assets like health insurance coverage.