What Type of Life Insurance Suitable for You?

We cannot deny the importance of life insurance, because it really secures our future to some extent. Many of you may know its importance and might have also life insurance through your employer. Sacrificing a little today will pay you huge amount in future at time of your need. About life insurance almost everyone knows. But how much one should buy? This depends on your needs, buy life insurance after figuring out you needs. When you will know for which purpose you want the life insurance policy it will become easy for you to determine that how much life insurance policy you should buy.

Thinking about life insurance gives a little sense of financial security to family also. That they might be having some coverage amount if you won’t be able to work anymore or died.

There is no doubt about that insurance is all about displacing risks, and its human nature to take precautionary measures against those risks for self and family security.

But how much life insurance one should buy?

Income Replacement

Do you need life insurance for paying your recent and future expenses and it also pay to your family after your death? If yes then it means you need life insurance for income replacement.

So to find out that how much life insurance policy you should buy, take your income divide it by your beneficiary’s expected return on investments, then subtract any assets he/she would have easy access to, such as saving accounts, a second property etc. This will give you an idea that how much life insurance you should buy to replace your income.

If you are only income earner then also calculate the cost of your benefits, like health insurance and 401k match. Probably in future your family would sell the big house, but remember to include the carrying costs and the impact moving can have on social structures.

Pay Off Debts

If you need a life insurance to pay off cars, credit cards, or mortgage, then it means you need life insurance for debts repayment. It will be better for you to buy your own regular life insurance policy for this purpose instead of credit life insurance or mortgage life insurance.

It’s best to make your own life insurance if you want a decreasing term-type protection to go down as your liabilities. Any type of life insurance in which life insurance amount remains level; you can always reduce it to the allowable minimum. Like this your premiums will go down and you will be able to snowball debt even faster!

Just take revision that there may be other expenses you’re leaving out. It’s a great thing to payoff your debts. But what about the rest amount, is that will be enough for your family’s survival? Final expenses could become expensive. These all things keep in mind while buying life insurance policy. It’s better to have a little too much life insurance than not enough.

Supplement Retirement

If you want to have a good life after retirement and you are not sure you could meet your goal if one of you two died unexpectedly then it means you need a life insurance to fill the retirement gap.

This is an easy plan as you already know that how much money you need saved for retirement and how many more years you have to go. If not, then it’s better to figure it out now. When you have your retirement number, subtract the amount you have saved up. Then you will know exactly that how much life insurance you need and the how long you need it to last.

College Savings

Some people buy life insurance so that their kid can go to college, even if they won’t be around to see them.

College expenses increase 5-8% every year so you must have to plan accordingly. When you will figure out that how much life insurance for this purpose need then it will be easy for you to compare the insurance quotes.

Stay-at-home spouse

Every person in the family haves its own value even if he or she don’t bring home an income. You can figure out in two ways that how much life insurance for stay-at-home moms or dads. In first way write down everything and price it out. The other way is just conversation about how much you would realistically need. The right number will be somewhere between 1x to 2/3x the income of the other spouse or partner, but it’s a personal choice. The thing which matters here is communication.

Bottom Line

It’s not necessary that you will be having any above mentioned things will be your reason to buy a life insurance. You can have combination of these goals and that’s good. If you have multiple goals then add the numbers to get a starting point. Talk with your family and loved ones to see if you should move it up or down. In your multiple goals if income base replacement is included also then use it alone as your base.

There are other plenty of reasons you might need life insurance too. Such as, estate planning and business continuation often involves life insurance.