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How Much Life Insurance Do I Need?
Knowing how much life insurance you do need is dependent on a number of factors such as your lifestyle, health and income. People with dependents may especially want to consider the benefits of life insurance. But having a life insurance policy can also be important for single people and business owners to help their beneficiaries pay for everything from funeral costs, mortgages, personal debts and education expenses.
How Much Is a Life Insurance Policy?
The price you pay on your monthly premium for life insurance is mostly determined by your health, your age, your insurance provider and your habits (smoking tobacco can cost you higher premiums).
One important step in understanding how much life insurance insurance you need is getting a grasp on how much you can afford to pay per month in premiums.
Before speaking with an agent about which types of life insurance to buy or how much coverage you should get, it’s important to answer the following questions:
- How much do you owe in debts?
- Do you have any outstanding medical bills?
- How many dependents do you have?
- What type of life insurance should you get?
- What is your net salary?
- How much do you spend each month?
- How much is your mortgage?
- Do you owe estate taxes?
- What are your assets?
- How much is in your savings?
- How much will your family or business need if you are not around?
- Have you considered the cost of your funeral?
- Do you want to donate to a charity upon your passing?
From there, you’ll want to take your total amount of debts and subtract your assets (e.g., home, cars, boats, property, savings, 401k). Don’t forget to figure in future costs such as a child's education, medical bills and other estimated burdens. This number will be a rough estimate of the amount of life insurance you should buy.
How to Calculate How Much Life Insurance You Need
For a simpler equation on how much life insurance you should buy, many experts say you should purchase enough coverage to match between 5-7 years of your present salary. For those with children, you may want to increase that number to 10 years of your salary.
It’s important to talk to your loved ones about what they would do if you were to pass away. The more you plan together, the better prepared your loved ones will be.
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.