Assets. Income. Expenses. Those are the three most important things to remember when you try to determine just how much life insurance you should Buy Life Insurance to safeguard the financial security and stability of your family when you die.
Calculating how much life insurance your family needs is based on three measures: your assets, your income, and your expenses. Be thorough and accurate in determining the amount of each. And then, you can be sure you purchase the amount of insurance coverage you need to protect your familyâ€™s financial future and give you peace of mind.
Letâ€™s look more closely at how to calculate assets, income, and expensesâ€¦
Assets: How much are your possessions worth? Your assets may be cash, savings accounts, the equity you have in your home or other property, stocks, and other investments. Your assets may be cars or guitars, artworks or baseball cards, or any other possessions of value.
Income: To calculate your income, include your spouseâ€™s monthly paycheck (after taxes) multiplied by the number of working years your spouse has left. Also include income from your social security benefits. And include income from any other sources, such as life insurance coverage.
Expenses: Hereâ€™s where things can get even trickier. Your expenses include taxes on your properties and other assets, your credit card and other debts, any medical costs that are not covered by insurance (and, of course, donâ€™t forget the cost of insurance as an expense). Other expenses include college funds for each of your children. Plus the day-to-day living expenses for your family. And expenses also include probate costs and the costs of your funeral.
Funeral costs plus burial expenses can cost approximately $10,000. With estate taxes, the good news is that you can leave your heirs up to $3.5 million in assets. But over that $3.5 million, the government takes 45 cents of every dollar! A 45% tax rate!Â Now, $3.5 million may sound like a lot of money, but factor in the equity on your home, your retirement accounts, life insurance benefits, and other assets, and $3.5 million may not look so out of reach.
So how much insurance do you need, and how much should you expect to pay for it?
Letâ€™s say you have a $200,000 mortgage plus other debts of $25,000. Letâ€™s also include a college fund of $100,000 for your childâ€™s education. Include $25,000 for â€œspecial needsâ€ (which could be related to career retraining for your spouse, for example). Letâ€™s assume your current annual living expenses are $50,000 and your spouseâ€™s annual net income is $35,000. Also include the value of your spouseâ€™s social security survivor benefit. (To determine the amount, request an estimate from the U.S. Social Security Administration; they base it on your 35 most productive income-earning years.) In this case, letâ€™s say the annual benefit to your family is $15,000.
Based on these figures, your family will have $10,000 or so less per year than they need. If you project that they need help for the next 15 years, an insurance company might estimate that you need about $350,000 in life insurance coverage. This coverage could cost you approximately $40 to $55 per month.
Thatâ€™s less than $2 a day for Term Life Insurance. The protection it gives your family, and the priceless peace of mind it provides to both you and your family. And getting coverage couldnâ€™t be easier. In most cases, you can even get Online Life Insurancewithout a medical examination. Just remember: assetsâ€¦incomeâ€¦expenses.