Most Americans have underinsured their most profitable asset. Your ability to make money for the remaining years is more valuable than your car or home. Life insurance is one way to build an instant estate for your loved ones if you were to pass away. There are six dollar amounts that you can add up to find out how much you should have in life insurance.
Paying off mortgage is often the most logical amount to buy in life insurance. This way your family can have a paid off home to live in. The balance you owe on your mortgage can make up a large part of your debt obligations.
Replacement Income is essential if you either rely on somebodies income or someone relies on your income. This is the amount your family would need to sustain their way of life. The best way to calculate this amount is to multiply your annual income by how many years you would want to insure sustainability.
Final expenses are important to think about. Unfortunately, it isn’t cheap to die. There will be expenses to your family for funeral arrangements, unpaid medical bills, and estate settlement costs. Typical funeral cost start around $10,000 and often exceed this amount.
College tuition is a goal for many parents to provide for their children. If you pass early, would your spouse be able to provide tuition on their own to your children? The cost of college varies greatly depending on your personal education goals. Multiply the anticipated annual tuition cost by the number of years your child would attend.
Paying of debts can take a big financial burden off your family. Consider an amount to pay off outstanding loans, credit card debt, etc. This can help give your family a clean slate.
A Legacy is important to some people. This additional amount can be used for gifts, charitable contributions, or other needs for your family. Although, this amount is not a necessity it is often important to many people to leave something for their family or cause.
Add up your totals for the above six categories. This is the amount of life insurance that you should have. The chances are that this amount is a lot higher than expected. Life insurance can be very affordable depending on how old and healthy you are. The best way to find out is to call a local independent agent. An independent agent will be able to recommend exactly what kind of policy would be best for you.