How Much Life Insurance Do I Really Need?

How Much Life Insurance Do I Really Need?
Determining that you have a need for life insurance is only the first step. Next, you need to select your insurer and the type of policy that works best for you. And at that point, there is still one major decision left to make – how much coverage you are going to get.
Here are some of the best strategies you can use to determine how much coverage you need and how to arrange it to your greatest advantage:

A Traditional Rule Of Thumb
If you want your beneficiary to be able to live at a similar standard of living after you’re gone, then a multiple of your annual salary is a good place to start. Most people go with 5 to 10 times their salary as a rule of thumb. Those with more savings and assets can use a lower multiple, while those without these extra protections should use a higher multiple.

To this base amount, however, you should do some modifications. You may want to add $100,000 per child and add on extra to cover significant debts. If you both have a pension and/or social security coming, you could reduce coverage somewhat; if you have a mortgage that your beneficiary can’t afford to pay on after you pass away, you should boost life insurance coverage and time it to take care of that for you.

Using An Online Calculator
You can use traditional rules of thumb and other factors to quickly calculate how much life insurance to buy via many free-to-use online calculators. These are great tools because they are quick and easy to use, and you can tinker with them until you get a result you are confident about.

Additionally, online calculators can be used to get a close estimate of how much a specific policy would cost per month.

Arranging One Or More Policies
Even when you know about how high of a death benefit you want, there are other matters to consider. Do you only want protection for a specified number of years, to protect your beneficiary in case of your untimely death? Then a term policy with, perhaps, a 10 or 20-year term might work well.

If you want a benefit that is guaranteed without any time limit, then whole life would be a better choice than term. Also, consider limited term whole life, which allows you to pay for only 10 or 20 years but secure your death benefit permanently.

Finally, some people find it wise to begin with a term policy and then upgrade to whole life later when they can afford it or to buy both types of policy so as to have added protection earlier but adequate protection later even if the term expires.

Be sure to choose an insurer you can trust and that is likely to still be around decades later to pay out the death benefit. And it also helps if your insurer has a local office and agent you can easily contact.

In Florida, contact Flagler County Insurance Agency for answers to all of your life insurance related questions and concerns, or for a free quote. We will be happy to work with you in customizing a policy that is both affordable and meets all your needs.