How Much Life Insurance Do I Need

When you have loved ones who count on you to provide for them, you want to be sure that that care will continue even when you’re not around anymore. But if you’re unsure of just how much life insurance you need to purchase, then you’re not alone.

How Much Life Insurance Do I NeedSelecting the right life insurance policy is a complex decision with numerous factors to take into account. The following covers some factors you’ll need to consider when deciding just how much life insurance you need to protect your family in the event of your demise.

Term vs. whole life insurance

Deciding between term and whole life insurance is one of the first steps to deciding how much insurance you need. Term policies are typically more affordable, but they expire after the defined term. Should the policy end before the death of the insured, it would have to be renewed in order for the holder to receive any benefits. Whole life policies do not expire and include an investment component, but they carry higher premiums.

Account for your burial expenses

No one likes to think about paying for their own burial. But this is one thing you’ll need to include in the calculations when you are deciding how much insurance you need. You don’t want your loved ones to be stuck worrying about expensive burial costs. Research average burial costs and remember to adjust for rising prices.

Length of time your family will need help

Take into account how long your beneficiaries will need your income in order to meet their needs. How long will your spouse need assistance? Until he or she finds a job, or until retirement? Do you have one or more children who are young and will not be independent for an extended period of time? Base your calculations on those types of questions.

How much income your beneficiaries will need

Do your best to calculate the living costs your survivors will be facing. Start with what those costs are now. Then, account for all those other expenses that a single person or parent may face, like child-care costs. If you have children who will be attending college, you’ll want to factor those costs in as well. Remember to allow for those unexpected expenses that always pop up.

Consider your other assets

Will your life insurance policy be all your family has to go on with in the case of your untimely demise? If so, then you are going to have to make sure that it’s enough to enable them to make ends meet. On the other hand, if you and your spouse have other assets such as a paid off home, stocks, IRAs, savings accounts, or retirement benefits, then you may be safe with a lower amount for your life insurance policy.

Leave room for any unmet expenses

Accidents or terminal illnesses that result in death often incur hefty medical expenses. As morbid as it may seem to even think about it, you need to be prepared so that your beneficiaries don’t end up spending all the income you meant for them on medical bills. Since your choice can have long-lasting effects on both your own life and the lives of your beneficiaries, it’s worth spending some time educating yourself on your options.