If you have someone who depends on you financially, then the chances are high that you do need life insurance, regardless of your age or your current health. This type of insurance can be immensely helpful for your dependents and family after you're gone. This type of insurance is frequently used to pay off medical bills or provide for daily necessities . The question is how much coverage you actually need, which can be a tough nut to crack.
Generally speaking, most companies quote this type of insurance based on your annual income. Your general quote is calculated by multiplying your current annual income by six to 10 to come up with the ideal amount for your insurance policy. However, other factors go into calculating how much insurance you need, such as:
The total debt you have attached to your name will need to be considered, especially if you have larger debts like student loan debt, medical bills, or other consumer debt. Your debt matters in this calculation because when you sign up for an insurance policy, it's often the case that some of that policy goes toward paying off your debts. The more debts you have, the greater your policy will need to be so your beneficiaries can use what is leftover.
Of course, your savings and investment accounts may offset any debts you have, particularly if you are involved in certain stock holdings. The amount of money in your savings and investment accounts are independent of your insurance policy, but the number is still cumulative for your overall quote. The larger your savings and investment accounts, the smaller your insurance policy needs to be.
Another factor to consider is how many years you intend this policy to last your beneficiaries. For example, if you have young children, you may intend for your insurance policy to provide for them until they are legal adults, or you may intend for the policy to help pay for college tuition fees. The years of replacement will likely increase the amount of your policy if you're younger than 50.
You may also need to consider end-of-life costs, such as medical bills and the cost of your funeral. Insurance policies like this are commonly used to pay for certain expenses immediately after you're gone to take the financial strain of your end of life arrangements off your family or beneficiaries.
There is no set number for the amount of insurance anyone should have because everyone has slightly different circumstances. Although your initial quote is likely going to be based on your annual income calculation, other factors will determine the final amount of your insurance policy, including your total debt, total savings, the years your insurance is intended to provide for your beneficiaries, and any end of life costs you may have.
To learn more about the appropriate amount of life insurance for you, contact the Society Insurance Network.