Tuesday, 29 October 2019

Life rarely goes as planned.

While a tragedy may be relatively unlikely, the reality is that it's certainly possible.

Thinking about how your family would function without you can be disturbing and unpleasant, but if you're working to take care of them now, you'll want to ensure that they'll be protected should the worst-case scenario occur. Life insurance is one of the best way to do that.

You should also consider how much insurance you need. Many options exist, and projecting the needs of your dependents at some unknown future date can be difficult. The answer is different for every family, and talking with a financial planner or other expert can be an ideal way to determine what's best. You can also develop preliminary answers with online tools like Bankrate's life insurance calculator.

To determine how much life insurance you should purchase, ask yourself these questions.

What are my obligations?

Count how many dependents you have and any outstanding debts–like a mortgage–your life insurance would need to cover. Keep in mind whether your life insurance will just need to support your spouse and children, or if it will also need to help care for your parents or other aging relatives. Because your responsibilities may change as you age–your children will grow up and likely become financially independent of you–the amount of life insurance you need may change as well.

How much would my family need?

Consider your current income and how much of it your life insurance would need to replace. While it may not be necessary for your family to maintain their current lifestyle, you'll want to make sure they'll have financial security. A general rule of thumb is to purchase enough life insurance to cover five to seven years of your salary, but if your children are young or you have other financial obligations, you may need to replace at least ten years of your salary.

What are my goals?

In addition to keeping the bills paid for your family in your absence, think about what else you'd want your life insurance to cover. For instance, would you want to pay for your children's college education? Or for your spouse to obtain additional education to find better employment? What about your spouse's retirement? Keep in mind any financial goals you hope to accomplish with your life insurance.

How much can I afford?

Finally, think about the life insurance payments and calculate how much you can afford right now. If you need life insurance but don't have a lot of extra cash for payments, consider term life insurance. A term policy will cover you for a certain amount of time, such as 20 years, and is cheaper than a whole life policy. When the term is over, you may be able to convert that term policy into a whole life insurance policy that will cover you as long as you live. Term life insurance can be quite affordable–a 40-year-old man can get a 20-year, $500,000 policy for about $350 per year, according to CNNMoney.

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