3 Methods To Decide How Much Life Insurance To Get
Posted on: 16 January 2023
Life insurance is something that you need, no matter how old you are. Life is unpredictable. If you have life insurance, then you know that your family has some money coming in after your death. That can help pay for your funeral, debts, and other expenses. When you are looking at life insurance, you have a lot of decisions you have to make. One of the decisions you must make is how much coverage you will need. Different methods can be used to help you figure out how much coverage you will need to have.
Annual Salary
One way to determine how much coverage you should have is to look at your annual salary. Some experts recommend you multiply your yearly salary several times, which is how much insurance you should get. How many times you should multiply your annual salary depends on which expert you talk to and what your insurance company says. For example, the insurance company you are interested in working with may suggest you multiply your annual salary by five. So, if you make $50,000 a year, you need to multiply that by five. That will give you an answer of $250,000. That amount would be the recommended coverage amount you get. This method gives your family money to take care of your funeral and to cover expenses as they find another source of income to rely on.
Years to Retirement
Another way to determine what amount you should get for your life insurance coverage is to use how many years you have until retirement age. With this method, you are still going to use your annual salary. But instead of multiplying it by five, you will multiply it by how many years you have left until retirement, set at age 65. If you are 33 now, you have 32 years until retirement. You need to multiply 32 times your annual salary of $50,000, which gives you the answer of 1.6 million dollars. That would be the ideal amount of insurance you should get if you use this method. This method gives your beneficiaries as much money as they need to cover the salary you would have been brining in for all those years.
Debt, Income, Mortgage, Education
With this method, you want to get enough coverage so that your survivors can pay off all of your debts, including any mortgage, pay for education for your children up until at least age 18, and provide a replacement income for your family.
Having life insurance is very important. You have a lot of decisions ahead of you when choosing which insurance to get, including whether or not to get term life or whole life insurance. You also need to figure out how much coverage you will have for your death benefit. You can find several methods to help you figure out that number.
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