How to Determine How Much Term Life Insurance You Need

| June 6, 2013
Term Life Insurance

Term Life Insurance

When you start thinking about life insurance, one of the first things that you need to do is stop thinking about yourself. Life insurance, unlike other informs of insurance, isn’t actually designed to protect the person being insured. Instead, life insurance is designed to protect the insured’s family in the event that he or she unfortunately passes away. Because of that fact, it is very important that you consider a number of factors when determine how much life insurance you actually need to buy. Life insurance policies are expensive and you absolutely do not want to spend a great deal of time and money on a policy that won’t actually take care of your family in the event that the unfortunate occurs.

The first thing that you need to do when determining how much term life insurance you need is make sure that you understand what term life insurance actually is. Term life insurance, simply put, is designed to provide coverage for a limited period of time at a fixed rate of payments. After the term dictated by both the insured and the policy expires, coverage is no longer guaranteed unless a person enters into another coverage agreement with the provider.

Determining how much term life insurance that you actually need isn’t complicated, but it can be time consuming. The process requires you to break your life down into essentially a series of numbers. To begin, add up all of the individual monthly expenses that your surviving family members will be responsible for in the event that you should pass away. You’ll need to consider any monthly pay that a surviving family member will receive from a job as well as monthly benefits that they may receive from other types of coverage. The number you are left with will be the monthly required income for your family.

Take the monthly required income for your family and multiply by 12 to arrive at the total amount of money your family will need per year after you pass away.

Another thing that you need to consider when purchasing term life insurance is the current age of your dependents. You’ll need less term life insurance coverage if your youngest child is 17, for example, than if your youngest child was only four years old.

When adding up all of your expenses, you really need to consider every last bill that your family will need to pay in your absence. Think about things like car payments, mortgages, utility bills, college tuitions and the like. All of these numbers will go into the calculation that will allow you to arrive at exactly how much term life insurance you’ll need.

Once you’ve added the total amount of life insurance that you’ll need, be sure to subtract any group term insurance coverage that may be provided by an employer. The number that you are left with will be the total amount of term life insurance that your family would need if you were to unexpectedly pass away today. That number will make sure that your family is taken

care of in the event of the unthinkable.

Jeff Noble has extensive experience as an insurance agent. His articles appear on insurance and personal finance blogs. Check out this analyzer for more information.

How to Determine How Much Term Life Insurance You Need

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