Save Money, Buy the Right Life Insurance Coverage Amount

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Reader’s Question:

How do I estimate the right amount of life insurance that I should buy?

Leica

Glendale, AZ

Knowing how to choose the right amount of life insurance coverage is essential for anyone wanting to purchase this kind of financial asset. Listed below are some of the most important factors that you should consider:

1. Expenses upon Death - Estimate how much money may be needed at the time of your death. This should include funeral costs, final expenses, and estate taxes.

2. Financial Obligations – You don’t want to leave your family/dependents a pile of debt upon your demise, right? Include mortgage balance, credit card debt, loans, and other financial obligations that you don’t want to burden your loved ones with.

3. Dependent’s Cost of Living – This would include supplementing the lost income that you bring. It should also include expenses for the basic necessities like food, shelter, and clothing. Social security survivorship benefits should also be factored in.

4. Calculating Years of Need – Buy coverage that can cover your dependents’ cost of living for at least the next several years.

5. Non-Monetary Income – A good example of this is medical insurance which is usually subsidized by your employer (and may be lost after your death). Factor these in as well.

6. Future Financial Needs – Include adequate amount of money for your kids’ college needs, or for your spouse’s retirement.

7. Other Income-Producing Assets – You may have a business on the side, or another source of income that will be lost once you pass away. This must also be included in your coverage estimate.

The total of these seven factors should give you a good idea of just exactly how much life insurance coverage amount your policy should carry. It wouldn’t hurt to get more if you can easily afford to do so. Discount life insurance rates and offers are also easily obtainable online, so you may want to check out life insurance comparison websites (like this one) and run a free rate quote check.

 

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