How to Choose Life Insurance|How Much Life Insurance Do You Need?

How Much Life Insurance Do You Need?

There are few things that are guaranteed in life. Unfortunately, one of them is the fact that it is temporary. Death can come whether we’d like to believe it or not and without much warning. To be sufficiently prepared you must know that the people you are leaving behind are taken care of. Life insurance is a way to ensure that your loved ones will be able to carry on their lives without dealing with financial struggle. But just how do you choose life insurance?

Life insurance is not a lottery. One does not just pick a number that sounds good and carries on until the day they pass. There is an art to calculating the ballpark number that would keep your family financially comfortable just as when you were alive. Don’t stress out about the prospect of death before it comes, just be prepared. Insure your life, so that your loved ones can live theirs. 

How to Choose Life Insurance: Factors 

Where You Are in Life

What point in your life have you reached? Should you even start to consider how to choose life insurance? For most people, life insurance may be a thought when they start a family, are nearing retirement or are at a certain age in life. Although accidents may happen every day, it is important to consider how your health can may affect death. Life insurance isn’t about you at all, it’s for your loved ones. Spouses and other dependents like children are essential people to consider when evaluating your possible life insurance. Life insurance should be large enough so that your dependents can live as if you were still alive providing a consistent income. Tools like life insurance calculators make how to choose your life insurance an easy task. There are various factors you should consider when thinking about your finalized life insurance total.

Income Replacement

Consider your net annual income. Life insurance plans are finalized as a set amount and mapped out over a specific amount time. For instance, if you make $45,000 and get a plan for 10 years, you should have finalized a plan for $450,000. This way your family will live with a consistent income as when you were alive. Once you have your targeted income per year nailed down and an estimated timeframe, it is crucial to then factor in your place in life. Whether you are a provider with small children or a provider with teenagers, where you and your family are in life matters. Children will typically depend on their parents until 18 and sometimes even beyond that age. Will your loved ones have enough for school over the years, other life expenses and college? This may be cause for a larger life insurance plan to keep your family out of financial distress. If you have young adult dependents, one may not need to invest in a large life insurance plan, because soon enough those dependents will be on their own. You will need to devise a plan that fits your loved one's expenses for as long as you see fit for the future. 

The most common life insurance plan is set for 10 years, but again, it is all relative to what you see fit for your dependents. If you arrange for a life insurance plan for 10 years, it is recommended that you provide your dependents with the income you have been providing as you had when you alive. This is just considering your base yearly income with no cushion for inflation. Another important financial factor to consider is whether or not you have money saved. If you have enough money saved, a lesser life insurance plan might work for your family. Maybe you have assets that could also shave a few years on your life insurance plan. Figuring out your dependents possible financial needs is a balancing act. All financials must be accounted for to narrow down your life insurance plan. 

What Do You Owe?

It is critical to consider what you owe currently as you are devising your life insurance plan. Debts and loans are some of the most important things to consider when you are thinking about your total life insurance cost. Debts and loans do not die with you. Your loved ones will need enough money to pay off any remaining debts or loans you leave behind. Another thing to consider is your mortgage. If you still have a mortgage, it is necessary for you to financially prepare your family to be able to pay that off. 

Future Expenses

Life insurance plans must also account for any future expenses that may arise over time. If your children need to go to college, it should be reflected in your insurance plan. Estimate how much each dependent would need to complete college so that they can receive the education you had hoped for them. Make sure your family has enough to pay for your funeral with your life insurance money. It will be your last expense in this world, relieve your family of the financial burden of the funeral with the money you factored into your plan. Even if you may have no dependents, it may be a concern for some to be able to pay for your funeral. Sometimes it may be a thought for some people to plan to cover their own funeral costs in a smaller life insurance plan done specifically to cover their funeral. 

When and if you feel that you are in the right spot in your life to consider life insurance is up to you. To find out more about life insurance contact your Allstate agent to help you devise a perfect life insurance plan to keep your loved ones financially safe when you’re gone.