When you’re looking to get life insurance coverage for your family, it’s important that you get a large enough policy to ensure that they have the money that they need if something tragic were to happen to you. Before you apply for any life insurance plan, you’ll need to determine how much coverage your family would need.
Debts and Final Expenses
The first number that you should crunch is all of your unpaid bills and final expenses that your loved ones would be responsible for if you were to pass away. The first goal of your life insurance is to give them the money to keep them from being strapped with a mountain of debt and no way to pay for all of those bills.
One of the biggest expenses to consider is your mortgage loan. This is one of the largest bills that your family members are going to be left with if something tragic were to happen to you. Without life insurance, your family would have to find a way to make your mortgage payment while still grieving for their loss. If you want to purchase a term insurance plan, you can buy a plan with a term length that matches the length of your mortgage loan.
You should also look at any additional debts that you would leave behind, like student loans, car payments, business loans, and much more. While you may not realize it, but if you were to pass away, your family could be left with hundreds of thousands of dollars of debt.
Another expense that you should plan for is your funeral costs and burial fees. The average funeral can cost around $10,000, which can be another bill that your family is responsible for. While it is not a huge expense, it’s just another debt that they would have to pay during a difficult time of their life. A life insurance policy will give them the money to respect your last wishes without breaking their bank account.
The next factor to consider is your annual salary. The second use of your life insurance is to replace your paycheck if you were to pass away. If you’re one of the main income earners in your home, and you have several people that rely on your salary, then they would struggle without your income every month, but that’s where life insurance comes in. Your policy will give your loved ones the money that they need to replace your paycheck until they can find a way to permanently replace that source of income.
Not only should you add up any monthly expenses that you have now, but you should also project any major expenses that your family would encounter in the future, like college tuition or day care. You don’t know every major bill that they are going to run into, but for a single-income family, those expenses can be difficult to cover.
One aspect that most people don’t consider when calculating their life insurance needs is giving back to charity or what kind of legacy that they want to leave behind. A life insurance plan is a great way to give back to a non-profit. If you want to give a portion of your life insurance to an organization, it’s simple to do that. It’s important that you ensure that your loved ones are taken care of before deciding to dedicate any of the money to a charity.
Using a Life Insurance Calculator
If you’re looking to buy a quality insurance plan, but you’re not sure how large of a plan you need to buy, the best idea is to use a life insurance calculator. There are dozens of different calculators that you can use. These tools will look at all of the different factors that go into determining your life insurance needs. This is the best way to ensure that you don’t overlook anything.
Not having enough life insurance is one of the worst mistakes that you could make for your loved ones. They would be left with additional bills and expenses, which can make an already difficult situation a thousand times worse. The vast majority of people that have a life insurance policy are drastically under-insured. Don’t be one of them, make sure that you’re buying enough life insurance protection for your family.