Where you are in life has a lot to do with how much life insurance you really need. Our recommendations for a couple in their thirties with 2 small children and a big new mortgage will obviously be different from a retired couple whose house is paid off. Although we can’t offer personalized advice in this blog today, we can help you start thinking about your potential expenses. Like,
Debt is a big factor when it comes to life insurance. The last thing you want your loved ones to worry about is covering your debt on their own. Think about what outstanding expenses you have right now that would need to be paid off. Such as your car, your house, your student loans, your credit cards, etc. We recommend that you add all that up and pad it a little to compensate for interest, to calculate your minimum life insurance needs.
Since this number is likely to fluctuate over time, it can easily be covered by term life insurance. With this policy, you can get a lot more coverage at a lower cost, so you can allow it to drop off over time as your debt is paid. This is a popular option for younger people who need more, but on a budget.
For many people, this is another huge consideration when purchasing life insurance. You not only want to ensure that your final expenses are covered, but also that your family will be taken care of. This applies more when you have young dependents or those that are otherwise financially dependent on you. In this case, what you’re trying to protect is essentially your earning potential. The easiest way to calculate this is by multiplying your annual income several times over. Some experts recommend doubling or tripling it, while others advocate for 7 to 8 times your yearly number. It’s all about what you’re comfortable with! At Freedom Insurance Agency, we want to help you find an amount that offers peace of mind. Not encourage you to go overboard on benefits.
Of course, your other assets need to come into play. If you have ample investments and savings, you may not necessarily need life insurance. But be sure you have something separate set up for final expenses. If you’re just considering all of your retirement funds, those serve an entirely different purpose. And the last thing you want to worry about in retirement is how you’re going to get life insurance.
If you’re at a point in life where most of your debts are settled, your dependents are now self-sufficient, and you’re just worried about having a little something extra. Whole life insurance could be the perfect solution for you. It’s designed to provide additional benefits like locked rates and cash value accumulation, but with smaller face values. In this way, it’s a better long-term option for those final expense plans.
While these aren’t the only three things to consider as you’re looking at life insurance, they are three very important factors. For more personalized advice and quotes, contact our team at Freedom Insurance Agency. We can turn this discussion to real numbers and give you the comfort of knowing everything you need is covered.