Have you ever wondered how much life insurance is “enough?” There are a ton of variables out there that will play a role in how you should plan ahead, such as life insurance costs, your specific financial situation, your family makeup, your age, etc. You’ll need to know how to balance all of these to make the right decision, and this quick guide will get you started in that regard. Here’s what you need to know.
How Important Is Age?
It wouldn’t be fair to completely discount the importance of age when you’re shopping for a life insurance policy, as the fact remains that buying insurance when you are younger is most always cheaper than purchasing it at an older age.
What you do need to realize, however, is that it isn’t completely impossible to purchase insurance when you are older, and insurance agents might actually play up age as a pressure tactic. No need to cave — in any situation, stay cool, and evaluate all your options before making a decision.
Calculating How Much You Need
When it comes to figuring out a dollar amount for your policy, you’ll want to keep several factors in mind. Most notably, you need to make sure that in the event of your death, you beneficiaries are taken care of, and that means replacing any income that would be lost by your demise.
Therefore, you want to make certain your policy payout is large enough to cover that should you expire, and can do some basic calculations to arrive at the right amount. Some insurers might advise multiplying your annual salary by up to ten in order to cover your dependents, but you might also multiply your salary by the number of years you have left until retirement to reach the desired amount.
Then there are also your debts to take into consideration. While replacing your income is one thing, it might also be prudent to have a life insurance policy that can cover your outstanding debts in the event of your demise. That includes the interest on those debts, so be sure to work it all into your calculations when figuring out how much life insurance you’re going to need.
Regardless of what kind of insurance you’re purchasing, knowing the amount you need ahead of time is going to play a big role in making sure you make the right choices. Be sure to run the numbers, then use them to help narrow down the best life insurance policy for you.