With a reputation for being difficult to understand, buying life insurance can be intimidating when terms such as whole life, portability, and riders are thrown around. But where most people get overwhelmed is the question: How much life insurance do I actually need? With the right tools and resources, selecting the right life insurance policy can be easier than you were expecting.
To determine the right death benefit for you and your family, our team at Foy Insurance will walk you through the process but keep in mind that your needs will change over time. Your first decision will be whether you want term life, which is insurance for a fixed period of time, or whole (permanent) life insurance, which includes an investment component that allows you to gradually build value with goal of keeping the policy until death. It could be determined that a combination of term and permanent is best solution.
How to Determine How Much Life Insurance You Need
Most employers offer life insurance to their employees as a common benefit and most individuals assume this means they don’t need a separate policy. Keep in mind while the life insurance you receive through your employer does not require underwriting than individual policies, they typically aren’t portable, meaning you can lose your coverage if you lose your job. Polices through your employer are typically more expensive so if you are in good health you might be able to purchase higher limits.
Tried-and-true rule of thumb.
One of the simplest ways to determine the financial coverage you will need from your life insurance is to buy a policy that is equal to a certain multiple of your income (typically five, seven, or 10 times your annual salary). Another rule of thumb is to start with a multiple of your income and then adding in your household debt, or $100,000 per child, to reach an appropriate benefit.
Use a life insurance calculator.
If you don’t want to stick to the rule of thumb, use a life insurance calculator to determine how much life insurance you actually need! Typically, you’ll provide information such as any debt, expected college plans, and number of children to figure out an exact figure for your life insurance needs.
Seek assistance from an insurance provider.
Our team at Foy Insurance will be able to take an outside look at your family goals, available resources, and your finances to make a personalized recommendation on how much life insurance you will need.
To speak with one of our team members about your life insurance policy, please contact us today!