You never want to leave your family in a lurch. You want to know that when you pass, even if it's unexpectedly, your funeral costs, debt, and your family will be taken care of. But, how much life insurance do you really need? If you're worried about being over or under insured, you've come to the right place. Let's look at how much life insurance you really need.
How Old Are You?
You need to think about your age for a number of reasons. If you're a young parent with young children, you need to think about how much money it costs each year to raise your children. You also need to think about how much it will cost to send them to college. On the other hand, if you're an older individual with a large number of assets, and no debt, your spouse may not need as much money after your passing.
In other words, if your children need $20,000 a year for their financial well-being and are toddlers, you would want to think about getting an insurance policy that covers 18 years, plus another $100,000 per child for college expenses. This means you would need AT LEAST $560,000 to cover their expenses and college education.
Don't forget to include the cost of funeral expenses and any debt you may have. The amount needed for an older individual would be much, much less because mortgage and debt would probably have been handled earlier in life and assets could be used for living expenses.
Do You Have Assets?
If you're someone who has a large amount of assets, such as a 401(k), IRA, etc, you may only want to think about having enough life insurance to cover the cost of your funeral and to give your spouse enough money to get her life in order after your passing and to care for your children. This will depend on your age, number of assets, number of children and their age, and what your spouse would want to do after your passing. In other words, you need to sit down and talk to your spouse.
Do You Have Dependents?
Those that don't have dependents, really only need enough life insurance to cover the cost of their funeral and to handle their affairs, such as debts. If no one is depending on you to care for them, you will not need a hefty life insurance policy.
There are a number of easy to use calculators online that make it super simple to discover a rough estimate of how much money you'll need for your life insurance policy. The biggest things to take into account is your age, dependents, assets, debt, and funeral costs.
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