Life Insurance Policy Documents with Magnifying Glass and Cash on a Table

Is it time for you to get life insurance? Life insurance is a great way to provide for your family – even after you have passed away – and can protect your family from financial hardship. We know that the topic of life insurance can be uncomfortable, but we know that you have questions you want answered. Questions like – how much life insurance coverage do I need? Saxton Law Firm in Kansas City, MO can help answer your questions.

How To Calculate How Much Life Insurance Coverage You Need

Have you determined the type of life insurance that you and your family need? Term Life Insurance vs Whole Life Insurance is an important debate when you decide to purchase a  life insurance policy – and it is just one factor to consider when you decide on your life insurance policy. Individuals who have questions about how much life insurance coverage they need can create a quick estimate with this basic step-by-step formula.

  • Calculate Your Financial Liability – When you decide to purchase a life insurance policy, the amount of coverage you need should be enough to cover the sum of your financial obligations. Add up your – mortgage balance, your debt, potential college tuition, expected funeral costs, potential child care costs and your annual salary (multiplied by the number of years you need to cover) – to determine how much your insurance policy might need to be.
  • Calculate and Remove Financial Assets – Do you have a stock portfolio, a college fund, a savings account or a current life insurance policy? Calculate the total of your financial assets and subtract it from the total of your financial liabilities – the remainder is an estimated amount for your life insurance policy.
Family Cutouts with Life Insurance Umbrella

Tips to Estimate Your Life Insurance Coverage

A little simple math can help you estimate how much life insurance coverage you need with your policy – but finances are not the only thing you need to consider when you purchase a policy. Here are a few tips that can help you estimate how much life insurance coverage you may need for your family. 

  • Tip #1 – When you create a financial plan, make your life insurance part of the plan and include college tuition expenses for your children, expected raises at work, expected increases in any financial assets and any expected future expenses like a new car or home.
  • Tip #2 – Do not be cheap with your policy. Do you expect to get annual raises each year? A rise in income can lead to an increase in expenses and a more lavish lifestyle for your family. Make sure that your policy accounts for potential increases in your family’s expenses.
  • Tip #3 – Communicate with your family. When you decide to purchase a life insurance policy, it is important to communicate with your family and ask questions. How much does your family believe they will need to cover expenses? Does your estimate make financial sense? Did you forget about any financial assets? Does your family need to replace your full income or just part?
  • Tip #4 – You may want to consider multiple smaller life insurance policies. Did you know you can buy more than one life insurance policy? Multiple policies can provide the same level of financial support and can account for any updates and changes to your financial situation. Look closer at life insurance quotes to find the right fit for your budget and you may want to consider a longer term life insurance policy for your spouse and a shorter term life insurance policy for your children. 

READ MORE: Can My Life Insurance Policy Have Multiple Beneficiaries?

Do you have questions about life insurance? You may be asking – how much life insurance coverage do I need? We hope that this quick guide created by Broadway by Bergstrom Automotive can help you estimate how much life insurance coverage you need. Contact Saxton Law Firm today to learn more about how to appeal a denied life insurance claim!