How Much Life Insurance Coverage Do You Need?

how much life insurance do you needYou may want to know how much life insurance coverage you need.

You don’t want to buy too little insurance because then your family will not be taken care of. You don’t want to buy too much insurance because then you are just wasting money.

How much is just right?

Here is a list of the costs that you need to consider when determining your life insurance coverage amounts:

Income

Many individuals often overlook the income that they contribute to the household funds. Other than your main salary, you may also have a side job or a business that brings in residual income for the house. When comparing life insurance, try to think of anything like a pension plan, hobby job income, or any other source of side income. All of these things should be included in your coverage calculations. Also remember to add in any family businesses as well that rely on you for financial support.

Money for Funeral Costs

The first expense that you should add into your life insurance coverage amount is the cost of the funeral. You would be surprised at how expensive they are now. The average funeral currently costs over $7,000. That’s just for a basic burial. A nicer casket or burial plot is even more expensive.

Outstanding Debts

These are the debts that your family will be left with in the event of your passing. Outstanding debts often include your mortgage payment, automobile payments, credit card debts, student loans, and other debts that you may have. Many of these debts are passed onto your heirs that inherit your personal property. Be sure to include all of these debts in your insurance coverage totals so that your family will be left with enough money to pay them off.

College Bound Children

How many children will you be sending to college in the future? If this number is zero, you can skip to the next step. If you do want to pay for future college tuitions, you can estimate the cost of college based on their age and factor in inflation. Remember to keep in mind which schools they may attend and those costs.

Inheritance for Heirs

When you ask yourself life insurance questions, you will also need to determine how much money you plan on leaving to your heirs. This is the amount of cash and personal property that you would like to leave to your spouse, children, family members, and other loved ones. Add all of that up and include it in the total coverage amount.

Once you know the totals your financial contributions, funeral expenses, debts, college tuition amounts, and the inheritance you’d like to leave, you will have a ballpark figure as to how much life insurance coverage you need. Remember to be realistic and good luck with finding great life insurance rates!

photo credit: Karen Eliot via photopin cc