How Much Life Insurance Do I Need?
Practically everyone has a need for some term life insurance. The question is, how much do you need? There are several models out there to help answer this question but the model I like to use asks the following to determine how much life insurance you need:
- What is your gross annual income?
- How long would you like to provide this income to your beneficiary/beneficiaries?
- Would you like this insurance to pay off any existing debts (i.e. mortgage, loans, credit card, college)? Keep in mind, if you are budgeting to pay these off with your current income and you are doing fine financially, you don’t need extra insurance to pay this off. This will be covered under the annual income that this policy will be replacing. I would only enter a dollar amount here if these debts are truly a burden.
- Would you like this policy to pay for burial expenses, please enter the amount you estimate for this.
- What is the total amount of existing life insurance that will not be replaced by this policy?
The answers to these questions gives us a good starting point in determining how much term life insurance you need. I always like to show options with several term limits so clients can see the full picture. The bottom line is you have to select a term limit that you are comfortable with, as well as one that fits your budget. If you are interested in obtaining a term life proposal please contact me.