Nobody wants to die and leave his or her loved ones in a financial predicament. Purchasing life insurance helps prevent this situation from happening. However, people sometimes find determining how much life insurance they should buy difficult. Learn more about which questions to ask when making this important decision.
Do You Need Life Insurance?
If you're a single person with no dependents, you may not need life insurance. However, this type of insurance may be a good idea if you owe a lot of money and don't want other people to have to pay your debts off if you die unexpectedly. People with families should have life insurance unless they have enough savings to cover the needs of their dependents.
Should You Get Whole Life Insurance?
Whole life insurance combines insurance with an investment, meaning the amount of the policy continues to grow as time goes on and people continue with the monthly payments.
This type of insurance can provide greater death benefits (and guaranteed death benefits) than similar term life policies, but only if you continue making payments for at least 16 years. If you cash out early, you'll have lost money.
Is Term Insurance Better For You?
People who want to pay lower premiums and have an insurance policy in place for just a set number of years (perhaps until the kids have finished college) often opt for term life insurance. This type of policy provides protection against loss of income of the insured person as long as you choose the right amount of insurance.
Do You Want to Use a Simple Formula?
If you just want a general idea, people sometimes multiply their current yearly income by 10 to figure out their life insurance needs. This isn't very exact, however, and can cause some people to be underinsured. This calculation also isn't useful for determining how much life insurance to purchase for a stay-at-home caregiver.
What Are Your Expenses?
Figure out how much your family needs per year to maintain their current lifestyle. Then multiply this by the number of years on the policy. Add in any additional expected future expenses, such as college costs for children, estate taxes, and funeral expenses. The result of this calculation can be a good starting number for your life insurance needs.
How Much Debt Do You Have?
Next, consider whether you have any debt you'd like paid off should you pass away unexpectedly. Do you have a mortgage, student loans, or a lot of credit card debt? Add this amount to the first total for an even better estimate of life insurance needs. The death benefits from life insurance aren't taxable, so increasing the death benefit may be a way to pay off debt without increasing your family's tax burden.
Do You Have a Significant Amount of Savings?
Consider retirement accounts, insurance policies offered through work, college savings accounts, and other savings that could lessen the total life insurance benefit needed. Remember to continue saving and paying into these accounts in the future if you plan for this when determining how much life insurance to purchase.
Does Your Family Have Any Other Sources of Income?
You can also typically subtract the projected income of your spouse from the total life insurance needed, as well as any other expected income, including social security as the spouse gets old enough to be eligible for these benefits. Remember that a stay-at-home parent may not be able to get a job and start work right away.
Should you have an existing life insurance policy that you no longer need, Habersham Funding, LLC, may be willing to purchase it from you. Contact them for more information.
Do You Need Life Insurance?
If you're a single person with no dependents, you may not need life insurance. However, this type of insurance may be a good idea if you owe a lot of money and don't want other people to have to pay your debts off if you die unexpectedly. People with families should have life insurance unless they have enough savings to cover the needs of their dependents.
Should You Get Whole Life Insurance?
Whole life insurance combines insurance with an investment, meaning the amount of the policy continues to grow as time goes on and people continue with the monthly payments.
This type of insurance can provide greater death benefits (and guaranteed death benefits) than similar term life policies, but only if you continue making payments for at least 16 years. If you cash out early, you'll have lost money.
Is Term Insurance Better For You?
People who want to pay lower premiums and have an insurance policy in place for just a set number of years (perhaps until the kids have finished college) often opt for term life insurance. This type of policy provides protection against loss of income of the insured person as long as you choose the right amount of insurance.
Do You Want to Use a Simple Formula?
If you just want a general idea, people sometimes multiply their current yearly income by 10 to figure out their life insurance needs. This isn't very exact, however, and can cause some people to be underinsured. This calculation also isn't useful for determining how much life insurance to purchase for a stay-at-home caregiver.
What Are Your Expenses?
Figure out how much your family needs per year to maintain their current lifestyle. Then multiply this by the number of years on the policy. Add in any additional expected future expenses, such as college costs for children, estate taxes, and funeral expenses. The result of this calculation can be a good starting number for your life insurance needs.
How Much Debt Do You Have?
Next, consider whether you have any debt you'd like paid off should you pass away unexpectedly. Do you have a mortgage, student loans, or a lot of credit card debt? Add this amount to the first total for an even better estimate of life insurance needs. The death benefits from life insurance aren't taxable, so increasing the death benefit may be a way to pay off debt without increasing your family's tax burden.
Do You Have a Significant Amount of Savings?
Consider retirement accounts, insurance policies offered through work, college savings accounts, and other savings that could lessen the total life insurance benefit needed. Remember to continue saving and paying into these accounts in the future if you plan for this when determining how much life insurance to purchase.
Does Your Family Have Any Other Sources of Income?
You can also typically subtract the projected income of your spouse from the total life insurance needed, as well as any other expected income, including social security as the spouse gets old enough to be eligible for these benefits. Remember that a stay-at-home parent may not be able to get a job and start work right away.
Should you have an existing life insurance policy that you no longer need, Habersham Funding, LLC, may be willing to purchase it from you. Contact them for more information.
