Life insurance can be tricky. It’s a hard topic that we all actively avoid, but is essential to protect your loved ones.
Below is a simple way to calculate how much life insurance you need. Just remember L.I.F.E.
LIABILITIES: Mortgage, car loans, student loans, personal loans, credit card balances. Anything that your family would be responsible for paying off would get added here.
INCOME: An easy estimate is 5-10 years of your income, but this varies greatly depending on your personal circumstances. If you are the sole income producer for your household, you need to factor a higher number of years for income replacement. If your spouse earns more than you, then you may be able to factor in a shorter number of years. Make sure to factor in bonuses and expected raises.
FINAL EXPENSES: This is the most straightforward section to plan for. You can easily find local costs for funeral, casket, headstone, plot, etc. In the United States funerals cost on average around $10,000.
EDUCATION: Do you want to pay for your children’s or grandchildren’s education? If so, how much will they need? This link will show national averages for different colleges and universities. https://nces.ed.gov/fastfacts/display.asp?id=76
