Life Insurance - How Much Do You Need?
Insurance is the means that an individual or a family can use in order to help them prepare against the emergencies of life. Life insurance is the form of this preparation that helps in the worst emergency – the death of a loved one. This could be for anyone in the family, or for the main breadwinner. Because so many things can happen to people, mostly unexpected, we want to be ready in the event that it does happen - but hope, too, that it never does. This article will show you how to determine just how much life insurance you should have in order to be prepared in the best way possible. When determining just how much coverage you should have, here are some things that you definitely want to take into consideration.
Your Yearly Expenses In the event that the main earnings winner should pass away, the goal of a life insurance policy is to sustain the family at its present level of living for a while. This means you need to calculate exactly what it costs for the family to live at the present level for one year. In order to help you calculate according to the rising cost of inflation, you should add a percentage increase for each year - possibly as much as 8%. Educating The Children To this figure, you need to add just how much it will cost to put each child all the way through college. Of course, this may be a little hard to do, since college costs are rapidly raising.
You should add, however, a percentage increase for each year until they graduate. A suggested amount would be 1 or 2% increase of the current tuition per year before college and during. Current Debts All of your current debts should also be added to the total amount of life insurance coverage. By adding this amount, it would enable the family to continue its current level of life - debt free. If there is any mortgage balance still owed, credit card debt, your own education bills, and any other bills should all be added into the calculation. Funeral Costs The costs of funerals these days have become a lot more expensive than they used to be, along with everything else. Funerals are now an average of about $6,500. Just to be safe, though, you need to add another $4-$5,000 so no debts are left after the funeral. Inheritance In your absence, it would be a good idea to leave your children a little extra to get them started and secure in life, if you are able. Calculate how much you want each of them to have, and then add that amount to the total.
Finally, in your calculations, you may want to add a couple of other things - depending on your situation. If you have parents that may need nursing home care before long, or a divorce situation that you have to include, or you may even want to add a donation to either a religious organization or to a charity. It all depends largely on what you can afford. You will not want to buy hastily, without having a rather good understanding of life insurance, and make sure that you do a cost comparison, too.