3 Ways to Determine How Much Life Insurance You Need, #110
Owning a life insurance policy isn’t just a good idea, it’s a necessary measure to ensure that the family you leave behind is taken care of. But how much life insurance do you actually need? On this episode, I’m going to discuss three different methods for determining the amount of life insurance you need and the best strategy for making that purchase.
You will want to hear this episode if you are interested in...
The simplest methods for determining how much life insurance you need [1:36]
The seven steps for comprehensively calculating your life insurance needs [3:38]
Exploring different life insurance policies [10:08]
Keeping it simple
Death is an inevitable part of life. It’s something everyone can anticipate at some point. Yet, so many are left financially unprepared by the passing of a loved one. That’s why it’s so important to not only have a life insurance policy but to ensure that policy provides enough financial security for those left behind. One of the easiest ways to determine how much life insurance you need is to multiply your annual income by ten. While that is relatively simple to figure out, it doesn’t account for additional assets or income your family would have received. You could also add the average cost of college tuition for every child who has yet to attend, but it’s still more of a broad stroke than an accurate assessment of your family’s needs in the event of your passing. Listen to this episode for the seven steps you need to know to accurately calculate your life insurance needs!
Identify the best option
When it comes to purchasing life insurance, there are a few different options to consider. The best option for covering yourself during your working years is term life insurance. For many people, the need for life insurance disappears once they retire. Presumably, your retirement portfolio would be enough to provide for your spouse once you pass away. Term insurance is the least expensive life insurance you can buy because there is no investment or cash value component. You are strictly paying to be insured for the term of the policy. As long as you are in relatively good health, you shouldn’t have any issues getting approved. And depending on the coverage you need, expect to pay between $50 and $150 per month.
As you get closer to retirement, your life insurance needs often decrease. You don’t need as much coverage because of the assets built in your retirement portfolio. Instead of buying one 20-year policy at a higher fixed level of coverage, you could spread the coverage out over a 5, 10, and 15-year policy in varying amounts. That way you can drop coverage off as needed and save more money in the long run.
Resources Mentioned
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