A Realistic Way To Find Out How Much Life Insurance You Need To Take Care Of Your Family
There are several kinds of Life Insurance, but the idea is always the same: If the policy is active, your beneficiaries get a sum of money when you die. The larger the payout, the costlier the policy. But what should that payout be?
There are a couple of approaches to answering this question: How much Life Insurance do you need to take care of your family? The first one’s as easy as a ten-slice pie: Get a policy worth 10 times your annual income. It’ll support your dependents for a number of years. Case closed.
But that can be quite expensive if you’re a high earner. And depending on your circumstances, your family might not need such a big cushion, especially if they’ll have other resources from salary, rental income, social security, or retirement or other savings. However, if you’re carrying a lot of debt, this could help eliminate some of the financial pressure.
So here’s another way to figure it: Aim to prevent hardship. Buy enough insurance so your family won’t suffer without your income.
This takes a little more work. You’ll have to add up all the financial obligations they’ll face — living expenses, mortgages and other outstanding loans, college costs, etc. — and figure out how much they’ll need to meet them without struggling.
Either way, you should consider consulting a certified financial advisor before you buy. They can help you figure out the right size policy for you and your dependents. And whenever there’s a major life change in your family, review your coverage and see if the new circumstances might call for more (or require less) coverage.
“Wait,” you say. “What if I don’t have any dependents?”
Simple: You probably don’t need Life Insurance at all.
Related Read: All You Need To Know About Life Insurance
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