Knowing how much life insurance you need could be confusing if you don’t know where to start from. In any case, we have outlined some steps you can follow to calculate how much life insurance you need.
Assess your family’s expenses
Sit down and list how much your family spends in a month. Are there any mortgages, student loans, estate taxes, medical bills or private loans you are spending money on? Does your family have new debts each month? How much money do you need to smoothly run your household in a month? Do not neglect to add the cost of funeral expenses in case a negative event happens to you. Most life insurance policies can readily pay for all your family’s need so that your loved ones standard of living will not drop when you are no more.
Evaluate your future financial obligations
Apart from deciding for the present, you also have to consider the future when you are calculating how much life insurance you need. Will you pay for your kids’ education till college level? If that is the case, include your children’s total educational fees into your calculation. If there are any significant family projects you would like to embark on in the future such as home purchase, automobile purchase, vacations around the world, estimate how much they would cost and include the amount in your life insurance policy.
Add up all your financial resources
Now is the time to add up the balances in your savings accounts, retirement accounts, investments, 401k, social security, IRA, and emergency reserves. Are you saving for the short term or long term? Also, include your partner’s income into your calculations.
The above steps to calculating your life insurance needs are easy enough for you to follow. But if you feel it is just too much for you to handle, you can call us to offer you support.