There is no such thing as a one-size-fits-all life insurance policy. You might need more — or less — life insurance coverage than your neighbor down the road, depending on factors ranging from income to debt to family size. Before shopping for a policy — or purchasing additional life insurance protection — it’s important to understand the factors that affect how much life insurance you need.
Do You Need Life Insurance?
You may be wondering whether you need life insurance at all. It’s a common misconception that only someone with a family that relies on their income needs life insurance. In reality, everyone can benefit from life insurance coverage. In addition to common uses, like protecting your income, life insurance can be used to cover burial expenses, pay your remaining debts and even support charitable organizations of your choosing.
6 Things to Consider When Buying Life Insurance
Of the Americans who have life insurance, one in five felt they needed more coverage, according to one survey. How do you determine how much life insurance you need? Here are six things to consider.
The amount on your tax return plays a significant role in your life insurance calculations. As a rule of thumb, the more you earn, the more coverage you need. Your Farm Bureau agent can help you determine how much life insurance you may need.
The proceeds from a life insurance policy need to take care of all of your debts, including mortgage balances, car loans, student loans, credit card balances or other debts that would be a burden to your family and will need to be paid in full. More debt necessitates more life insurance.
Reviewing your existing assets will help you determine how much life insurance you need. If you have significant savings and investments that can be used to cover burial/estate expenses, pay off debts and provide a financial cushion for your family, you’ll need less life insurance than someone with fewer assets.
4. Existing Coverage
Do you have life insurance coverage through an employer? Depending on the amount of that coverage, having your own personally owned policy may be a good idea.
5. Family Size
The more dependents you have, the more life insurance you may need. In addition to thinking about the number of children depending on you for coverage, take their ages into consideration as well. You’ll need more life insurance coverage to protect young children through adulthood than you would for college graduates with their own income.
6. Future Needs
Life insurance helps protect your family, and that means purchasing enough coverage for their future needs, including educational expenses. Life insurance has unexpected uses you can benefit from, including paying your children’s tuition fees. When calculating how much life insurance you need, determine how much it’ll cost to send your children to college.
We’re Here to Help
Not sure how much life insurance you need? Our online calculator is a good place to start. Then, make an appointment with your Farm Bureau agent for a detailed analysis of your life insurance needs.