When it comes to life insurance, there’s a lot of information out there. It can be difficult to determine what best applies to you and your family’s needs. This is because every family has different needs that stem from earnings, children, debts and other living expenses. Though families don’t often fit into cookie cutter models, many financial professionals recommend purchasing life insurance in an amount equal to about five to ten years of your annual income.
There are two main factors—among many—that contribute to the amount of life insurance you should purchase.
- Salary replacement: If you die and your salary is no longer coming in to help pay the bills, how much would your family need to continue making ends meet. This largely depends on whether your family consists of one primary wage earner with one primary caretaker, or two working spouses. One way to determine this number is to calculate your “time to retirement,” which you can do by multiplying your annual salary by the number of years until you would retire. This gives a projected estimate of how much you might earn over your career, giving your family the money they require to continue living their accustomed lifestyles.
- Dependents: Consider those who depend on you, which is your children in many cases. If your children are already teenagers or grown, you may not need as much coverage as if your children are still babies or toddlers. However, some people find themselves in different situations. For instance, you may financially provide for your elderly parents or a disabled sibling. It’s important to think about how long your dependents might need your financial help when determining how much life insurance to buy.
These figures can add up rather quickly, which is why rules of thumb are made. However, your best bet is to work with an independent insurance agent, who can calculate how much coverage you should get based on your unique needs. As a bonus, life insurance premiums are often more affordable than people often think. So why not spring for more coverage so your family can benefit more?
Get a quote today. Call Allen Harmon Insurance for more information on life insurance.