Life insurance is critical once you enter into certain stages of life. If you have a house, student loans, children, are married, or are in a myriad of other situations, life insurance is something that protects your most precious asset, your life. It’s very obvious, but many people neglect to draw the simple conclusion that their ability to be alive is what allows them to own a home, enrich the lives of others, and provide for a family, so why not insure it? However, understanding how much your life is worth, and how long you should insure it for can be very difficult! We’ve found there is an easy method to help determine how much life insurance you should carry and for how long. Just use the acronym, LIFE.
What are your current debts? How much do you still owe on your mortgage? How much student loan debt do you still have? Add what you currently owe together to get the first part of how much insurance you should carry. This is critical as you don’t want to leave your family struggling to pay the debt, both good and bad, that you have collected.
If you died, could your family survive without your current income? You don’t necessarily need to replace all of your income, although that may be wise. You also don’t want to just replace your income for one year. So, for example, if you want to leave your surviving family members with $3,000 a month for the next 10 years, you would need a minimum of $350,000 in life insurance.
A modest funeral today costs around $8,000. It is a hard conversation, but a necessary one to discuss with your loved ones what type of funeral you would like if you were to pass away. This will help you understand more fully how much insurance you should have.
Do you want to leave something for an education fund for your children, or grandchildren? This does not just have to be for college. Think of how much it costs to raise a child through their high school years. The USDA says it costs $233,610 for a middle-income family to raise a child from birth to age 18.
How long should you carry life insurance?
This depends on several factors. What is your risk tolerance? How much do you want to spend on life insurance? How long do you need to protect your ability to provide and earn money? Answering these questions will help you determine how long you should carry life insurance. Remember, most term policies allow you to go up to 30 years until you reach a certain age when the maximum term drops to 20 years.
Life insurance should be tailored to your individual needs and desires. When you’re considering how much insurance to buy, use this simple acronym to help you understand the amount of insurance you need, and for how long you should carry it.
We have plenty of tools to help you look even deeper at your needs, so call us today to discuss your term life policy.