When purchasing life insurance, you must consider the expected expenses such as the age of your spouse or children, the income needed to maintain life, loans and tuition.This article will help you systematically evaluate how much life insurance is suitable for you, and answer the question "how much should I insure?"
American Life Insurance Guide > Life Insurance Academy > How much life insurance do I need?
When considering purchasing life insurance, the first question we encounter is often: "How much should I insure?".Everyone's actual needs are different.You must consider things like the age of your spouse and children, how much income you need to survive, future large expenses such as various loans and college tuition, and how much life insurance you can afford.
In this article of LifeInsuranceGuru, you will learn:
- Financial obligations of life insurance
- Life insurance demand breakdown
- Life insurance coverage calculator
- Who does not need life insurance
Financial obligations of life insurance
Life insurance provides protection for your family and other people who depend on you.According to the terms of your policy, if you die, your beneficiary will receive the promised death benefit (insured amount).
Unless you can be completely self-sufficient-it means you have enough savings to protect your family from any possible heavy financial burden-otherwise, you need to understand,How much life insurance policy do you need?.A reasonable insurance policy guarantees the common interests of you and your beneficiaries.A reasonable insurance policy can make you affordable, and you won't face termination of insurance due to insufficient payment.According to experience, how to find a reasonable insurance coverage can be done by "needs-based analysis", which can calculate all the expenses you need to pay at the beginning (or the expenses you need to pay in the future).
If you find yourself asking "how much life insurance should I buy?" or "how much should I insure?" and feel unable to start, then this article will start to solve this problem from the following.
Financial considerations
If you die because your debt has not been paid off, your family or people who depend on you may get into debt trouble.If you give a loan guarantee or co-sign, such as a mortgage, your spouse may be liable for debt.You must want to leave enough money for your beneficiaries to continue to repay your loan, for example, especially if this type of car loan or housing loan, your family members often need to continue to use and live.
If you have children, we recommend that you consider the cost of future university education when applying for life insurance.Education can provide your child with the possibility of straddling classes and a comfortable lifestyle, but it costs tens of thousands of dollars each year, and the child’s tuition (as well as room and board, textbooks and all other college expenses) is often the biggest of your adulthood A cost of living.The point is to plan how much it will cost to get to university from now on-it will cost more to apply for life insurance after more than a decade than if you apply for an insurance policy now.
If you have children or other relatives who need to be taken care of by you, you can add hundreds of thousands of dollars in life insurance to your existing insurance coverage.This money can be used to pay for the long-term care you provide for dependent family members.
In terms of financial hedging, when considering how much life insurance you need to buy, please evaluate the daily expenses of your family.This can include consumption of necessities, such as food and medical expenses, or discretionary expenses such as family vacations.To understand how your loved one depends on you financially, add up the monthly bill and the fixed fee.You need to make sure that your life insurance premiums can offset these expenses.
When life ends, there is still a lot of expense.The average cost of funerals ranges from US$7,000 to US$10,000, including funeral home expenses, funeral expenses, coffin expenses, etc.Many policyholders calculate these final costs and include them in their insurance coverage, so when their families face the emotional pain of losing their loved ones, they will not have to bear the financial burden.
Your health and age
The older the applicant, the lower the demand for insurance coverage.That's because at that time, your debts became less and less, and the people who depended on you gradually became financially independent.
But please note: age is a very important consideration when determining the insured amount.This is not a reason to postpone policy formulation.The older you are, the more likely you are to die.The more likely you are to die, the higher your premiums.In other words, if you apply for an insurance policy when you are young and healthy, you can get more affordable insurance rates.
Therefore, once it is determined that insurance is needed, it is best to lock in the premium immediately.
How much life insurance can you afford?
If you cannot afford the premium, then life insurance has no meaning to you.This is why it is important to consider how much you can pay each month.Higher sum assured means more expensive premiums.
Most applicants have to decide whether to buy term life insurance or whole life insurance.Term life insurance can last for a certain number of years, and then expire; as long as you continue to pay the premium, the whole life insurance will continue.The cost of a whole life insurance policy is approximately four times that of a term life insurance policy, so most applicants-especially those based on a budget-should choose term life insurance.
Learn more about the difference between term and whole life insurance.
The good news is that term life insurance is cheaper than many people think.Although the exact price depends on many individual factors, the average cost is between $3 and $400 per year.
What life insurance policy should I buy?
定期人寿保险的保额在20,000美元至1,000万美元之间。根据匿名的数据，30多岁和40多岁的人最常购买的25万美元到100万美元保额的保单。请记住，这个统计数据裡的保额是人们自己决定的 – 它们并不一定反映出理想的情况。
For young people, a formula derived from experience is:Insured amount = annual income x 10 times
However, if you want to get a more accurate estimate, you need to do some mathematical calculations.
Let us take a fairly typical American family as an example.You are the father of a family of four. The family members include your wife and two children.Suppose you earn $50,000 per year and have an additional $20,000 in assets.You also hope to pay off approximately $20 in loans within 500,000 years.
After calculating the cost of raising children and future college expenses, you have a financial expectation of approximately $190 million, which means that your ideal premium should be this amount minus the amount of assets-so approximately $180 million in insurance.
| Source of income | |
| after-tax income | $32,500 |
| 资产 | $20,000 |
| — | — |
| expenditure | |
| Five-year university tuition and living expenses are about $32,500/year | $162,500 |
| Cost of raising two children*, 3 years old/5 years old | $1,176,147 |
| Funeral expenses after death | $10,000 |
| Total expenditure | $1,348,647 |
| — | — |
| debt | |
| credit card | $5,000 |
| car loan | $3,000 |
| Housing Loans | $500,000 |
| Total debt | $518,000 |
| — | — |
| Total financial target (expenditure + debt) | $1,856,647 |
| Total financial goals-assets | $1,836,647 |
| — | — |
| Recommended policy premium | $1,840,000 |
*Assuming that every child goes to a private four-year university in a non-state, plus the expenses during the growth
Life insurance coverage calculator
It is best to know in advance the cost details that you need to consider in order to understand your insurance needs.The American Life Insurance Guide website has designed and produced an online life insurance coverage calculator. With this life insurance calculator, you can easily determine how much money you need to pay for your financial statements.It will automatically accumulate your debts and expenditures, calculate your assets and how long and how much protection you want to provide to beneficiaries.Through calculation, this will let you know how much your death benefit amount, that is, the insured amount, should be.
Click to calculate life insurance coverage
Who does not need life insurance?
In short, judge first – Can you use your income to pay for insurance premiums.If you cannot pay the premium, you may not need life insurance for the time being.
If you just want to seek life insurance for death claims, you may not need life insurance if you meet the following conditions.
You belong to a low-income group
Low-income people may find it difficult to make room for life insurance in their daily budget.But it’s worth reminding that term life insurance is much cheaper than people think: a healthy 30-year-old person only pays an average of $20 a month on a 21-year policy.For those who cannot afford their financial situation, they can focus on saving to meet their spending needs at any time.
You are young and single
If you are single and have no children, you may not need so much life insurance.However, if this situation changes, you may need to be prepared, because when you are young and healthy, the purchase price will be lower.In addition, if you have the idea of giving back to the society, you can set your life insurance to pay to the charity of your choice.
Your spouse has life insurance
If you and your spouse have children, it makes sense that either party has life insurance.If the family cuts off any source of income, no matter how large or small the income is, it may mean financial difficulties for the family.
However, if you and your spouse do not have children, the size of the policy you apply for depends on your savings.Death compensation can help maintain a certain standard of living, but if the other party has its own source of income, then it will not be financially struggling for the necessary expenses.
You have insurance provided by the company
Many people passedEmployer obtains insurance.However, the life insurance provided by your employer may not be enough for you.In addition, it is closely related to your work situation. If you change jobs, the insurance policy is often cancelled.Please consult the HR in the company to understand your insurance coverage.If it does not meet the needs of you and your family, please consider applying for additional insurance to supplement your employer's plan.
You are totally self-sufficient
If you are already very wealthy and have enough funds to deal with any financial situation of your family, you are basically self-sufficient.You may not need life insurance in the traditional sense.
exception
In the last four cases above: young and single; spouse has life insurance;The company provides group life insurance; Finance can be self-sufficient; we consider using the life insurance account of the cash value type in advance to carry outSupplementary retirement income planning, Or consider using a cash value life insurance account for wealth inheritance or estate planning when the finances are self-sufficient, then life insurance is a good channel.
American Life Insurance Guide > Life Insurance Academy > How much life insurance do I need?
