Term Life Insurance Articles
How To Determine The Term Life Coverage That Your Family Needs
2009-09-06
You don't want to buy more term life insurance than you need because you will be paying increased premiums that you don't have to pay. By the same token, you don't want to purchase too little and leave your family struggling in the event of your death. Each family's needs are unique, so it is necessary to sit down and do some calculations to determine the amount of term life coverage you need. Some advisors may focus on a simple formula of 10 times your salary, but that fails to take into account some long- and short-term expenses that term life insurance can easily cover. Getting a term life insurance quote and finding insurance that's right for you will cover your family's needs. If this method of life insurance errs in anyway, it errs in making sure your family is overprotected.
The first thing to look at in determining life insurance coverage is to total up the lump sum items that can be paid off to minimize your family's future expenses. Begin with your mortgage. What is the outstanding balance? Add to that any loans and the costs of funeral and burial expenses. Being able to pay these items off in full will allow your family a fresh start without any debt and without having to wonder if they will be able to make the next mortgage payment.
Next, look to the future. The rule of thumb is to plan for 10 years worth of your salary. This should give your family more than enough time to find a way to replace your lost income, especially when you have also taken into account paying off the mortgage with your term life coverage. If you have children, plan for $80,000 for four years of college for each.
Once you've totaled up all of these items, subtract out the value of any assets you have that your family can use. This includes retirement accounts, employer-sponsored insurance plans and cash savings. The final total is how much term life coverage you need and can begin seeking out a term life insurance quote. When you're comparing quotes, make sure you can lock in the rate for at least 10 years. When the time comes for renewal of your policy, run the figures again. Your mortgage balance will be lower. Your income will probably be higher. You may have put some or all of your children through college. Once you have the new figure, that number is the amount of coverage you'll ask for quotes on. Remember term life insurance is a way to protect your family and ensure their financial stability.
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You don't want to buy more term life insurance than you need because you will be paying increased premiums that you don't have to pay. By the same token, you don't want to purchase too little and leave your family struggling in the event of your death. Each family's needs are unique, so it is necessary to sit down and do some calculations to determine the amount of term life coverage you need. Some advisors may focus on a simple formula of 10 times your salary, but that fails to take into account some long- and short-term expenses that term life insurance can easily cover. Getting a term life insurance quote and finding insurance that's right for you will cover your family's needs. If this method of life insurance errs in anyway, it errs in making sure your family is overprotected.
The first thing to look at in determining life insurance coverage is to total up the lump sum items that can be paid off to minimize your family's future expenses. Begin with your mortgage. What is the outstanding balance? Add to that any loans and the costs of funeral and burial expenses. Being able to pay these items off in full will allow your family a fresh start without any debt and without having to wonder if they will be able to make the next mortgage payment.
Next, look to the future. The rule of thumb is to plan for 10 years worth of your salary. This should give your family more than enough time to find a way to replace your lost income, especially when you have also taken into account paying off the mortgage with your term life coverage. If you have children, plan for $80,000 for four years of college for each.
Once you've totaled up all of these items, subtract out the value of any assets you have that your family can use. This includes retirement accounts, employer-sponsored insurance plans and cash savings. The final total is how much term life coverage you need and can begin seeking out a term life insurance quote. When you're comparing quotes, make sure you can lock in the rate for at least 10 years. When the time comes for renewal of your policy, run the figures again. Your mortgage balance will be lower. Your income will probably be higher. You may have put some or all of your children through college. Once you have the new figure, that number is the amount of coverage you'll ask for quotes on. Remember term life insurance is a way to protect your family and ensure their financial stability.
