If you decide it's time, life insurance, no doubt, buy, ask, "how much coverage I need?" It is not an exact answer, because life changes, but there are a number of elements that should always be considered when determining the level of benefits can be bought at death. This article aims to show how to determine this amount and help you make the best decision.
The first item that will ultimately affect the coverage amount you purchase is your budget. Obviously you want the least expensive policy available but you need to set a budget for how much you can afford each month. Once a monthly budget is set the insurance agent can then determine what products and coverage limits are possible. The worst thing most life insurance shoppers do is ask how much a $1 million dollar life policy will cost. They may not need $1 million in coverage or they may need more but will never know because they didn't ask the right questions.
Everyone is at different stages in their life and this will ultimately determine how much life insurance they need. For example if you are a single adult with no children your needs are different than a family with kids in school. Below you will find categories of life insurance consumers, determine which one you fit in.
- Single Adult - This person is not married and does not have any children.
- Married Adults - This couple just got married and are most likely both employed.
- Married with Young Children - Usually includes children less than 5 years old.
- Single Parent - One Adult financially responsible for one or more children.
- Family with Teenagers - Teenagers are closer to college and will require more money.
- Empty Nester - Children recently moved out and financially stable income
Most people will fall into one of those categories and which stage of life you are in will determine your insurance needs.
Now you need to get a pen and paper out to calculate some numbers. Here is what you need to write down:
- Total assets in dollars
- Total amount of debt including mortgage
- Approximate expenses at death
- Annual income required to maintain lifestyle
These will help you determine the total life insurance amount needed. There are many calculators online that can help so be sure to search for life insurance calculator. The next step is the hardest part and that is to prioritize what it is you want to accomplish with leaving money to your loved ones. This can only be done by you but here are a few things to consider.
- Do you want your children to go to college and what type of college?
- Do you want your spouse or loved one to be able to not work?
- Are there major debts that you would like paid such as credit card or mortgage?
- Who will be the beneficiary and how would you like them to use the money?
As I stated earlier there is no right answer but if you know what you want to accomplish with the life policy and how much you can afford it will be that much easier. I would recommend getting multiple quotes for life insurance from local agents to help you get an estimate of what it will cost.