Question: How much life insurance do you need?
Answer: It all depends…
But, does this one-size-fits-allapproach apply to your situation? Maybe, maybe not.
First off, be aware that the amount of insurance that you need today may change dramatically in the future. For instance, the single, carefree young man--whose need for life insurance today is minimal--might become a married homeowner with a couple of kids in a few years. The responsibilities that have been added into his life will considerably increase the amount of insurance that he should carry. Here are some of the factors that must be taken into consideration in deciding how much insurance coverage is right for you:
And remember, just because you are a stay-at-home parent without income doesn’t mean you can forego life insurance. Childcare is expensive and hiring someone to take over your household responsibilities could put a sizable strain on your family’s budget.
If you have long-term financial goals, now is the time to think about how those plans would be affected by the loss of your paycheck. If your children are young, your life insurance might be needed to support them for quite a few years in your absence. In the case of a special-needs child, it will probably be for a lifetime.
In addition to your income, your family will likely be losing your employer-provided health insurance, which would amount to thousands of dollars in premiums each year to replace it. Consider that your family will have to trade in an aging vehicle at some point or that a teenage driver might need a car for school, a part-time job, or commuting to college. If these and other long-term goals are part of your planning today, it is important to provide for them in your life insurance estimates.
Once you have determined how much lost income you will need to replace, you can add that amount to any mortgage, debts, final expenses and education funds you want to cover. This is your life insurance number. From that figure you can subtract:
One important consideration about life insurance at work is that it is only a benefit as long as you are working at that company. If you change jobs, you might end up with less coverage or none at all. For that reason, it might make sense to exclude this coverage from your calculations.
Underestimating your future financial needs will leave you underinsured. And if you believe that you can buy more insurance in the future, understand that will only work if you are as healthy then as you are now. Unexpected illnesses could make your future life insurance premiums prohibitively expensive—if you can get coverage at all.
Coming up with an accurate life insurance amount can seem like a daunting task, but you don’t have to tackle it by yourself. Click here to contact us or call us at (800) 947-1270 or (610) 775-3848; we can guide you through the process, and help you to arrive at a life insurance number that’s right for you.