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Things To Consider When Determining How Much Life Insurance You Need

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No one knows your financial situation better than you. So, you shouldn't let anyone else tell you how much life insurance your family needs, but you shouldn't allow yourself to get overwhelmed by the different options available either. Fortunately, it isn't difficult to determine how much life insurance you need if you have questions. Learn how to determine a good life insurance coverage amount for your family and what type of things you need to take into consideration.

Basic Calculations

You can estimate the coverage amount on your own by adding the total amount of your debt, the estimated costs of your funeral services, and around six months to one year of your income. If you don't have a lot of debt and don't expect to pay a lot of funeral expenses, you can keep things simple and determine your life insurance coverage amount by multiplying your current income by eight. Both of these methods will give you a rough estimate of the amount of money your family will need to cover any current debts, pay for your funeral, and maintain their current standard of living until your income can be replaced.

Your Spouse's Employment Status

If your spouse doesn't currently work, and doesn't plan to work after your death, you should consider increasing the amount of your life insurance coverage accordingly. For example, instead of taking six months to one year of your current income into consideration, you might want to calculate your coverage amount so that it includes five to 10 years of income replacement. This way, your family has enough money to live on for an extended period of time.

Your Children's Education

Do you have children that will need to go to college in the future? If so, how will your children's college tuition be paid if you aren't alive while they are attending school? If you don't already have a plan in place, such as a fully funded college savings account, you should consider increasing your life insurance coverage amount so that it will cover the costs of your children's college educations. All you need to do is use the current average cost of college to determine how much you need to increase your coverage amount.

Ultimately, the amount of life insurance coverage you purchase is completely up to you. As long as you take your family's current and future financial needs into account, you should be able to come up with a reasonable coverage amount. For more information, contact local professionals like Davies-Barry Ins.


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