09/03/2020
How Much Term Life Insurance Do I Need?
You're ready to buy Term Life Insurance. But you are probably wondering, how much Term Life Insurance do I need? And for how long? Even the best term life insurance falls short if you don't have enough. Then again, overdoing it buying term life insurance policy doesn't make great sense either, especially if you're watching your budget.
Conducting your own term life insurance needs analysis starts with a common sense approach. Here are some things to consider when thinking about "How Much Term Life Insurance Do I Need?"
Term life insurance to equal a multiple of your salary.
Many people buy Term Life Insurance with the idea of replacing lost income. But what exactly does that mean? The Insurance Information Institute gives an example of buying term life insurance policy that is 20 times one's salary before taxes.
Opinions vary, so you might see recommendations for buying term life insurance policy that is five or seven to ten times your current salary. It boils down to figuring out your own individual current and future financial needs. When calculating the best term life insurance amount, ask yourself:
• How much money does it take to run the household? (Rent or mortgage, bills, food, etc.)
• How much is my current income?
• How much do we have in savings and investment accounts?
• How much is there in our retirement account(s)?
• How much do we have in other life insurance policies?
Term life insurance to support loved ones for a specified number of years.
When buying term life insurance policy, the term itself can be just as important as the coverage amount. Ask yourself:
• How many years will my partner/spouse need until retirement?
• How many years until my dependents are finished with college or can support themselves?
• How many years until our home is paid off?
Term life insurance to pay for immediate expenses.
When buying term life insurance policy, many think of immediate expenses such as the mortgage, loans and food. But what about other not so obvious costs? Ask yourself:
• How much are final expenses likely to cost?
• What if there are medical bills?
• Is there enough money to cover a leave of absence if my spouse needs time to get back on track?
Term life insurance to pay for outstanding debts.
If you're like most, you've got some debts. You may want to buy a term life insurance plan that covers:
• Credit card debt
• Auto loans
• Personal loans
• Mortgage and second mortgage
Term life insurance to pay for college.
The bottom line? If you're buying a term life insurance policy today hoping it will help your kids get through college years from now, do your best to calculate a realistic cost.
Term life insurance can fit your budget and cover you adequately.
When shopping online for Term Life Insurance quotes, you're bound to see plenty of calculators to help you figure out how much coverage to buy. These are helpful when trying to figure out "How Much Term Life Insurance Do I Need?", but they don't tell the whole story. Determining your coverage needs and term length can be tricky. It's best to speak to a licensed agent and determine realistic costs, income and expenses that make sense for you and your loved ones. The goal isn't just to get the best term life insurance rates, but also the right coverage amount and term that makes sense.
