The importance of insurance cannot be denied, especially if you have a family to worry about. The need for it becomes even greater if you do not have a lot of savings to begin with, but would like to leave something for them to invest or enjoy in case something unexpected happens to you.
Here are a few things to consider in finding out how much insurance you actually need.
- How much do you earn in a month? Especially if your income pretty much covers all the expenses in your household, you have to make sure that your insurance should be enough to give your family an amount equivalent to or more than what you are earning now. If you have an annual income of $40,000 a year, for example, and you believe that your dependents would invest the lump sum with an 8% return, $500,000 would be a good enough coverage. To guard yourself against inflation, you can add an extra amount to this coverage or you can add the amount of your total annual income, which leaves you with $540,000.
- How much debt do you have? Regardless of death, your debts will still have to be paid. To spare your family from the unnecessary burden of having to pay this off, add the total amount of your debt to the amount of coverage that you came up with based on your earnings. In this case, you estimated that you need a $540,000 policy to replace your $40,000 annual income. If you have debts of up to $200,000, then coverage worth $740,000 would be just right. Might as well add a little extra to take care of interest as well.
- Are there obligations in the future that you want to get ready for? If your spouse has plans of moving back to her hometown abroad when you’re gone, or would like to give your child a good university education, factor these in as well. Just compute the total expenses that you are getting ready for, and add this onto your coverage. Again, add a little extra to guard your insurance against inflation.
Seeing how large the amount you need can often be overwhelming, causing some people to think twice about their actual need of getting insured. Basically, if you have nobody else to worry about when you die, then it’s okay to forego the process. You can also consider the age of your kids. If your kids are still a little too young to fend for themselves in case something happens to you now, then an insurance policy would take care of them in your absence.
If you worry about your family’s future when you’re gone, the life insurance you’re getting will be a worthy investment. Just consider how massive their loss would be emotionally and financially, and how they would be able to survive without your income. As morbid as it may all sound, there is nothing wrong with preparing for your family’s future, especially when you think about how unpredictable life really is.
If you would like to secure your family’s future, act now by clicking below to get a free quote!
Shawn is the CFO and Co-Founder of Signature Insurance Group. In addition to his being raised in a family whose involvement in the insurance industry stretches back six generations, he has personally been in the business since 1999.
Shawn enjoys spending time with his wife, Holly, and three sons, Braxton, Hudson, and Maddox.
Shawn can be reached at Shawn@SIGWinder.com.