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by Jeff Rose
How Much Life Insurance Do You Need?
Choosing life insurance may be one of the most important decisions that can be made. Life insurance can help pay medical or funeral costs, help establish a future for your children or even just ensure your family’s finances are stable, in the event of something tragic happening. The peace of mind provided by a life insurance policy means knowing that if anything should happen to you, your family will be taken care of.
If you’re not sure how much you need, be sure to use our free term life insurance calculator below.
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If you’re married, have a family of any size, personally own a small business, or have anyone depending specifically on you and your income, a life insurance policy could be a huge benefit. In the case of being the main source of income for your family, something tragic could take away that source of income and leave your family with the burden of funeral costs, as well as any previous debts you may have in your name. If you own a small business of your own, or share a business with other owners, life insurance can protect the business too.
Deciding how large a policy you’ll need is all about figuring out how much money will be necessary to get your family past immediate needs like funeral expenses or current debt, and further down the road, how much will be needed to maintain your family’s current standard of living.
The typical opinion is that life insurance benefits should be equal to seven to ten times an annual salary, but there are different factors that can require that number to be higher or lower. Determining the sustainability of the rest of the family’s income, and determining whether or not that income is going to be reliable (extra child care may be necessary with less members of the family available to take care of the children) are extremely important factors that can affect your family’s financial future.
With factors like age, weight, medical history and family history all so varying, the best way to figure out what kind of policy you should get is by getting different quotes through a term life insurance calculator.
To start, you’ll need to think about the immediate costs a policy should cover as soon as it goes into effect. Funerals currently average around $7,000 for a basic funeral and up to $10,000 once appropriate decorations and flower arrangements have been selected.
The next decision will be how much your family will need to survive, comparing current and future living costs and how much the surviving family members or beneficiaries earn themselves. The phrase “one million dollars” may sound extreme, but over a 20 year period, that means $50,000 annually. Depending on your family’s future, that may or may not help with things from housing to college financing.
Every analysis will be different based on the company providing the insurance quote; some can take extremely detailed input items and some do their own calculations based on current averages and projected numbers. Term life insurance calculators can to take your specific details and analyze them for you; inputting your current annual income, age, and your family’s potential financial needs, the calculations can be done quickly and easily for you, saving you the time and stress of calculating the figures on your own.