You need life insurance if anyone will suffer a financial hardship caused by your death. Our ability to earn an income is what makes us so valuable. If that income stops, your family will suffer. Life insurance can be used to meet your family’s future needs by replacing your income.
Many people will also use life insurance for specific needs such as making sure the mortgage is paid off and leaving the family with a debt-free home. Other people use life insurance as means to pay for burial expenses. It is safe to say that sooner or later we are all going to die; it is our responsibility to prepare for that day so our family won’t suffer financially as well as emotionally.
Employer group life insurance is great as supplemental coverage, but ask yourself this: What happens to my employer coverage when I retire, change jobs, or get laid off? Group coverage is only good when you are part of the group. We have all heard the saying “Don’t put all your eggs in one basket.” Make sure you have planned ahead and bought individual life insurance so no matter what happens, your family will be protected.
There are different ways to calculate how much life insurance you need. Below are the major concerns that most experts agree should be used to determine your need for life insurance.
Our needs analysis calculator is a great way to determine how much coverage you need.
What will your family need to enable them to maintain the same standard of living if you should die in the prime of life? Income needs are usually greatest when you have young children. Most experts agree that you will need 5 to 10 times your annual income to replace your income if you die.
Money will be needed to pay off your mortgage. If you rent, you will want to think about putting money aside for a “rent fund.”
Educating children can be very expensive. The average cost of tuition for a four-year, in-state public university is about $3,000, and $17,000 for a private university. The current cost for room and board is about $5,000 per year. Books and other fees should be included as well. You will want to consider this for all children.