Life Insurance Coverage: Key Factors to Consider When Assessing How Much Term Life Insurance You Need

Life insurance salesmen will try to convince you to buy more insurance than you need. The more coverage you buy, the more you will pay in monthly premiums, meaning that your life insurance policy will help line the pockets of the insurance company. You don't want to be caught paying more than you need into your insurance, but you also don't want to buy too little coverage and leave your family without proper financial security. How do you balance the cost of insurance against the payout?

How To Calculate How Much Life Insurance You Need

When determining life insurance needs, you first need to consider exactly what the purpose of your policy is. If you are the primary income in your family, your needs will be different than if your spouse makes the majority of the money. If you have very young children at home, you will need more insurance than a home without children.

When first calculating your policy needs, consider the following items:

· How much money do you make each year?

· What is the total amount of any secured debts you would leave behind?

· What percentage of the household's total income comes from you?

· How many years do you want to provide replacement income to your family?

· Do you want to set money aside for the funeral cost?

· Do you want to set money aside for the possibility of lingering medical expenses?

Once you have some rough figures in mind, you can figure out how much your family needs each year, multiply that by the number of years until they become independent, and then add other one-time costs like funeral expenses. One grey factor will be the medical expenses. If you have good health insurance, you should not worry about this, but jobs change and with that, the insurance. It may be prudent to add in funds to pay for such needs. This will give you an honest answer without anyone trying to sell you additional coverage the way a life insurance salesman might. You can then go online and compare life insurance rates through a quote site.

What Don't You Need Insurance For?

In some cases, insurance isn't the wisest choice. If you want to fund your child's education, pay for a retirement fund for your spouse, or put aside money to move to the Bahamas, you may be better off putting those funds into an interest-bearing investment. That way, the money isn't lost if you survive to the end of your life insurance term. Even if you do pass away, the money in the account will be available to your beneficiaries.

Ideally, the purpose of life insurance is to make sure your family doesn't suffer a financial hardship if you die unexpectedly. It's not meant to make your surviving relatives rich. If you're paying too much for your term life insurance, you're gambling against your own life; instead, buy only as much coverage as you need and invest the rest.

Life insurance needs vary from one person to the next. Because there are so many factors involved in determining the value of a policy, no one answer will fit all customers. Nevertheless, there are ways to determine how much insurance you might need in order to cover your family's needs. By checking in advance, you can rest easy knowing that your family will receive enough coverage in the event of your premature death.