How Much Life Insurance Is Right For Me?
the hardest part of buying life insurance? For most people, it's trying
to figure out exactly how much you should have. It doesn’t make
financial sense to spend money on protection you don’t need. But you
still have to make sure your family will always be comfortable — even
if the worst happens.
On one hand, some financial advisors
recommend multiplying your yearly income by 7. On the other hand, they
recommend purchasing just enough coverage to protect your income during
your working years, and put the savings into retirement investments.
what’s right for you? Before you decide to buy a policy, ask yourself
these questions about your current — and future — financial needs.
4 Questions To Ask Before You Buy Life Insurance
The answers to these 4 questions will help you determine what amount of life insurance is right for you.
1. Do you have any short-term financial needs?
You can get this figure by first adding up your short-term debts, like
credit cards and car loans. Next, add in the amount you would need to
cover emergency expenses like unexpected hospital visits or home
2. Do you have any long-term debts?
Long-term debts include your mortgage, any student loans, or your
children’s expected tuition costs. You can use today’s college prices
to give you an idea of how much your children will need in a few years.
3. How much would it cost to maintain your family’s current lifestyle?
Add up how much it costs to run your household and care for your family
for one year. That includes your household and food bills,
transportation costs, and childcare. Don’t forget to add in “standard
of living” expenses like clothing and travel expenses. Once you’ve
added up one year of costs, multiply that by the total years you expect
to be your family’s financial provider.
4. What is your family’s total number of assets?
Add up your family’s resources. Your resources include all your
savings, investments, home equity and Social Security benefits. Only
add up your “liquid assets” — those resources that your family can
easily turn into cash.
Now all you have to do is subtract your
total resources from your total expenses. This number is the minimum
life insurance protection you should consider buying. You should ask
yourself these questions once a year so you can make sure your life
coverage matches your current financial situation.
We can also help you figure out your life insurance needs and answer any questions that you have. Contact us today for a free consultation about your options.