There’s nothing more sobering than having to face questions about life insurance. Thinking about your own mortality – or that of your family members – isn’t exactly a pleasant way to spend an hour or two. But what can make matters even worse is not knowing what the heck you’re doing when shopping around for insurance estimates. The first question is always: How do I determine how much life insurance I’ll need?
Unfortunately, there’s no simple equation to answer that question. It really depends on several different factors including your age, whether or not you’re married, how many children you have, how old they are if you do, and how much money you earn. Here are the top three things to consider when getting insurance estimates.
1. Coverage for funeral expenses. Again, not a fun scenario to mull over, but far preferable to leaving your family at a financial loss in the event of the inevitable. Burial costs can run from $10,000 to $20,000. If you get coverage for nothing else, get coverage for this.
2. Add up your debts. Nowhere does the old saying “you can’t take it with you” ring more true than this. If you think that shuffling off this mortal coil will also erase any debt you owe, remember that it’ll simply be transferred to your survivors. When considering how much life insurance you need consider if you’ve got a load of debt or a mortgage, and ensure you get a quote for adequate coverage to cover those costs.
3. Income and future expenses. Add up how much money you’ll earn between now and the time you hit retirement age at your current rate of pay to cover the loss of income your survivors would experience. If you’ve got kids, you may want to add in the cost of college tuition.
Once you’ve totaled up the figures for these three main concerns, you’ll have a good idea of just how much life insurance you’ll need to adequately cover your family. Bear in mind that not all insurance estimates will deliver the same premiums, so it’s important to shop around for different life policies until you find the one that’s right for you and your family.