Nothing in life is as inevitable as death. We’re all going to face it one day, and so will our loved ones. If you’re the primary source of income for your family, you need to make sure they’re covered financially once you’re gone. One of the best ways you can do this is by getting yourself life insurance.
But how do you know what the right amount is? Is there a way to calculate it?
Here we’ll answer all of your questions regarding life insurance to help you protect your loved ones even in your death.
So, without any further ado, let’s get right to the bottom of it.
Depends on your debt
Are you still paying off your mortgage, student loans, or any other outstanding debt? It’s not something you’d want to leave to your family members, especially if they financially depend on you. So, if your debt totals to, let’s say, $100 000, it’s what your life insurance needs to cover. However, you’d also want to think about interest and inflation – the actual amount your loved ones will need to pay off your debts in the future will be a bit higher than what it is today.
We advise you to hire a financial advisor to help you calculate the right amount, especially in regard to your current debt. You’ll get an accurate projection of your debt in the future, which can determine the amount you’ll insure yourself for.
One of the most important factors to consider when you’re getting life insurance is your income. If you’re the sole provider for your family, you’ll want them to be financially secure once you pass away. Your life insurance policy should replace your yearly income at the least – inflation and other monetary factors should be accounted for as well.
Once you determine what the lowest policy you should go for, as well as how to protect your investment from inflation effects, you can check out different insurance calculators online. They’re not always accurate, but they can give you great approximations to base your decision.
Either way, your income will determine the amount on your life insurance policy. The important thing is not to undervalue it – everything else will fall into place.
Ensuring your kids’ future is set
If your kids are still young, you’ll need to think about their future, namely their education. Even though nobody likes to think they won’t be there to send their children away for school, it’s a possibility that needs to be considered.
Make sure you include these expenses in your life insurance policy – it’s better to be safe than sorry. Education is expensive – but it’s the only way you’re going to ensure your kids’ futures are set after you’re gone.
Of course, even if your kids don’t end up using your insurance to pay for college, they can use it, later on, to pay off their student loans. Either way, make sure you account for their education when determining the „right“ insurance policy.
Talk to your family
You’re not taking life insurance for your own sake – you’re doing it for your family and loved ones who depend on you. It only makes sense you should talk things through with them before proceeding. Even though it seems like an awkward conversation starter, it’s something you all need to talk about together.
Your family members might be able to give you some insight into their future expenses and the ways your insurance can cover those. Their input is more than valuable – so don’t hesitate to have that conversation.
Now, of course, not all insurance companies will provide you with the same benefits. We’ve found the best provider and the best product they have on offer for 2023, you can read more here if you’re interested.
Determine who’s getting insured besides you
Chances are you’re not your family’s sole provider. If that’s the case for you, make sure you get your spouse insured as well. Again, it’s not the most pleasant thing to think about, but what you leave behind is what gives your life eternal meaning.
Besides determining those family members who require life insurance, you should also determine those who do not. For example, your children, as precious as they are, aren’t providing financially for the family, therefore they do not require life insurance in itself.
If there’s more than one family member that needs to get life insurance, your policy will be higher. As long as you make sure all of your future expenses are covered, you’re picking the perfect amount. If you’re unable to determine what the best policy is for you, consult with a financial expert before making the final decision.
Get extra coverage if you deem it necessary
Most life insurance providers don’t offer one-size-fits-all policies. You’ll have to pay extra in order to have scenarios such as becoming disabled covered with your insurance. In most cases, these are completely worth paying for, as you never know what life could bring you.
Of course, all of this completely depends on your specific needs and circumstances. Make sure you’ve examined everything we’ve mentioned above, and choose a reputable insurance company for the best possible results.
In many cases, it is advisable to consider investing in multiple, smaller life insurances than a singular big one. It’s much more cost-effective, and it keeps your risks as low as possible. Don’t hesitate to browse around until you’ve found what works the best for you and your specific circumstances. There are many different insurance companies you can choose from – picking the best one out there completely depends on you.
The bottom line
Life insurance is one of the most common ways people choose to protect their loved ones in case they pass away unexpectedly. Getting one is an excellent idea, especially if you’re the sole provider for your entire family.
We’ve provided you with some tips on how to calculate the minimum life insurance amount you’ll need to cover all of your future expenses. We hope you found it helpful and we wish you the best of luck in all of your future endeavors.