How much term life insurance do you need?
A term life insurance policy provides coverage for a specified time period, usually between 10 and 30 years.
Your beneficiaries receive a payout from the policy if you pass away during the coverage period, which they can use to cover funeral expenses, household bills, or any remaining debts you may have left behind.
The payouts for term life insurance policies vary depending on the company, but most companies offer options in the millions. You need to consider many factors when determining the amount of term life insurance you should buy.
You can start by getting a free online price estimate now to get an idea of what to expect.
What is the right amount of term life insurance for you?
You can better determine how much term life insurance you need by answering these four questions.
Is there anyone dependent on you?
Single people may only need coverage to cover their funeral, burial, and any outstanding debts they leave behind so that their loved ones do not have to pay.
Having a dependent, like kids or a spouse, you’ll probably want extra coverage, particularly if you contribute to the household income. According to many experts, you should multiply your annual income by 10 and add $100,000 per child for college expenses.
Are you the only bread earner in your household?
In the event that your spouse is a stay-at-home parent or otherwise does not work outside the home, you may want to increase your payout even more.
In the event that you pass away, they would need to return to work, and their at-home duties would need to be taken care of by another person, such as a nanny or housekeeper. In the event that you are absent, make sure your policy covers these extra costs.
Here you can get a free online quote to find out how much a policy might cost.
What is the total amount of your debt?
Your loved ones do not deserve to be saddled with debt they cannot repay. In order to be sure you’ll receive enough coverage for your debts, add up the balances on all your loans, including mortgages, credit cards, and student loans.
Additionally, you should include any debts your spouse or other household members may have, as they will also have to be paid off eventually.
Once you add all your other needs – funeral, burial, salary replacement, and possible home services – you’ll get an idea of how much term life insurance coverage you’ll need.
Do you have any assets to leave behind?
From the number you calculated above, you can subtract assets you will leave your heirs – for example, liquid assets like savings accounts or college funds.
The situation can change quickly, so having an extra buffer is always a good idea. There may be medical bills or other end-of-life expenses that you can’t plan for.
Decide what’s right for you
In order to determine how much term life insurance coverage you need, there is no set amount or formula. According to your circumstances, you may also want to consider whole life insurance, variable life insurance, or universal life insurance.
Consider speaking with an independent insurance agent if you’re unsure what type of life insurance to buy or how much coverage to get. It is their job to help you shop around for the best insurance policy, compare insurance companies, and get the best coverage at the best price.