How much is enough? Its a tough question to answer as sadly you won’t be here to collect it.
The question really should be how much life insurance do your dependents need? Its not an easy question to answer and to can be harder to figure out. How much life insurance do you need can sometimes put people off when they look at the numbers and decide its just too much. Today we will try to break it down in to easy segments and then see where we go from there.
End of Life Expenses
Lets get the hardest one out of there way first. How much will the funeral cost? Burial and other funeral expenses can be costly. On average funerals run between $7,000 – $10,000 depending of course...cremations would be less. Then you need to also factor in Federal and State taxes plus any probate/legal costs.
Mortgage / Debts
The largest debt you are likely to have is an outstanding mortgage. Unless there is any current mortgage protection of life insurance in force, this debt will continue and will require paying. Life Insurance allows your family to stay in their home and maintain their lifestyle. Any other outstanding loans (car loans or bank loans etc) should also be included in the amount to calculate.
Most people would like to have peace of mind knowing their children's education would be funded if they were no longer here. Life insurance can ensure that there are enough funds to make that happen.
Replace lost income
If the main wage earner dies, that income should be replaced. Remember this is the net after taxes and any other regular deductions have been taken out. Start with your current annual before-tax salary. The other number you'll need is the time, in years, until you reach retirement age. Given these two numbers, you can figure out how much your family will need to replace this lost income over this length of time should something happen to you.
Investigate the cost of Life Insurance
Once you have an idea of the total required get some quotes. During this process compare the costs and coverage. You might be pleasantly surprised at how affordable term life insurance really is.
As a married couple you share a life together, but you also share each other’s financial obligations. What if one of you died tomorrow? Would the survivor have enough money to pay for your final expenses, eliminate debts such as credit card balances and car loans, and buy some time to be able to adjust to a new way of life? Life insurance can help ensure that these financial goals are met if tragedy strikes.
It's a misconception that the only person who needs life insurance is the primary breadwinner of the household because they are the ones who bring home a regular salary. It’s not just the breadwinner who needs life insurance - the need to purchase life insurance for the stay-at-home parent should not be underestimated.
Unfortunately too many families fail to plan for this unexpected hardship as it's not something most people like to think about - the idea of leaving behind your family is unfathomable. However, preparing for the unexpected doesn’t make it happen any sooner and it is just a prudent and wise move as the death of a stay-at-home parent can leave a family extremely vulnerable and can place a huge financial burden on the family.
A stay-at-home parent provides valuable services that the surviving parent would have to pay to replace. The cost of child care in America is staggering. The average cost of full-time daycare in the United States is over $11,000 per year or $900 a month.
Couples who consider all the ramifications will quickly understand why it's so important that a life insurance policy covers both parents. Should something happen to the stay-at-home parent, the surviving spouse soon would find himself or herself as the primary income earner and the primary child care provider, while also coping with the loss. A life insurance payout could also enable the surviving breadwinner to take a few years off work while the family regains footing.
Term life insurance protection is surprisingly affordable and simple to purchase. Get a free instant quote now or call us to discuss 484-919-5423.
The short answer to that is most likely not. While taking advantage of life insurance coverage through your employer is a smart step toward protecting your family if you’re no longer around, it may not be all the coverage you need.
First of all confirm that you have coverage. Then find out how much coverage you have. It’s usually tied to your annual income. For example, if you make $50,000 a year and have a policy worth 2 times your income, your coverage amount is $100,000.
Third decide how much coverage makes sense for you and your family. One basic rule of thumb is that the death benefit on your policy should equal seven to 10 times the amount of your annual salary. Usually employer coverage is not enough so it makes sense to purchase an individual policy to fill the gap.
Two really good reasons you should supplement with individual life insurance coverage: