We take it by now you understand the importance of having your life insured, being the main or significant source of income for your family. Having come to this conclusion it is important to determine how much life insurance you wish to purchase, and for how long you want your family protected.
There are many methods of calculation to ascertain how much life insurance you need. One of which we provide here on our site. We made it a very straightforward calculator to use.
The amount of coverage needed is really based on your budget and goals. This will inform you of how much risk you can afford to replace artificially.
This is one way of choosing a term length and coverage amount, based on the effortless, yet important idea of restoring your income. Although this is not a specific suggestion for your personal situation, generally this method works well.
Roughly knowing how many years it will be until you retire is a good estimate for establishing a term length and coverage amount. Until retirement you will most likely have people who depend on you and your income. (for example your spouse/partner, elderly parents, and/or children).
Choose a coverage amount that’s equal to your annual salary multiplied by your term length. For example, if you make $100,000 a year and have 10 years left until retirement, pick a coverage amount of $1M. If you have 20 years left until retirement, pick a coverage of $100,000 x 20 = $2M.
If your a goal oriented person and would like to examine the finer details in order to determine your coverage and term amount, here are 3 steps to follow:
Ask yourself these questions.
Why do I want to buy life insurance? At this very moment as I read this sentence, what would cause me stress in regard to what may or (may not happen) if I were to die in the next 10, 20, or 30 years?
Write down your answers, and for each of them figure out if money would help ease your mind. If money is the thread linking your concerns together, you will have several life insurance goals on your hands, which will help direct your plans to secure your family's well-being.
Here’s a list of goals we often hear from customers:
I want my family to:
• Keep the house/buy a house
• Pay off my debts
• Afford daily expenses (groceries, health care, child care, housing, utilities, transportation…)
• Afford traveling and hobbies
• Have an immediate rainy day fund
• Afford higher education
• Have money for retirement
• Pay for my funeral
If these life insurance goals look very similar to general financial goals for you and your family, it would be because they are. The point of life insurance is to replace ones monetary worth. So that your family’s economic status remains the same, despite what happens to you.
Now that you have a framework for your goals, you can then determine how much money will be needed for your family to reach those goals.
For example, what's the current balance left on your mortgage? Or how much money does your family need at their immediate disposal for emergencies?
Then, taking all the above information into account you should now be able to establish a time frame for each goal. Your notes should look similar to this:
Financial goals -
Funds needed -
Time frame -
Pay off mortgage
$150,000
Over 15 years
Send 2 kids to college
$100,000
Look into Community College for the 1st 2 years to save money
In 10-13 years
Build an emergency fund
$50,000
As soon as possible
Pay for expenses
$50,000
Each year until my spouse has saved up enough for retirement
Examples shown for illustrative purposes only.
Finding your term
To determine your life insurance term, or how long you should be covered for, take the longest time frame from your list — 20 years in this case, if that’s when you anticipate your significant other to retire.
Calculating your coverage amount
To figure out your coverage amount, or the size of the payout you’d want to leave behind, add up the total amount of money that will be needed over your term. In this example:
+ $150,000
+ $100,000
+ $50,000
+ $50,000 x 20 years
$ 1,300,000
Now subtract any savings you already have, say $100,000. Those go toward all the goals you’ve outlined above.
$1,300,000
- $100,000
$1,200,000
Round things up (depending on what coverage level options are offered by the life insurance company) and you’re looking at a $1,280,000,
20 year term life insurance policy.
Fortunately term life insurance is much more affordable than people initially think. Start by getting an estimated quote for your ideal coverage and term (we can provide you with one in minutes). After the quote proceed accordingly:
If the quote fits within your monthly allowance, that’s excellent. We'd advise you not to cut corners if you don’t have to. Just sit back and relax knowing that everything is taken care of.
If you must pinch pennies, here are a few ways to help make things fit your plan better:
If your spouse or partner brings in some income, do factor this variable in and subtract this from your total amount of coverage needed.
Look into social security payouts — in certain circumstances the federal government pays death benefits to specific members of your family — deduct those savings from your total coverage amount.
If you lose sight of whats most important, go back to your goals so you can reevaluate and cut your coverage amount appropriately.
Remember as far as life insurance is concerned, something is always better than nothing.
If you need help double-checking your math or thinking about trade-offs, don't hesitate to reach out to us. Make life easier by utilizing the professional services offered by Insured Care. It is our job to put you and your family in a more advantageous position should sudden life changes occur. Contact us @ 808.897.9080
It is recommended by experts to have life insurance in place that is the equivalent of 10 times your income. For a more tailored fit of coverage, analyze your goals and budget. Ask yourself what the money would be used for (mortgage? college expenses? etc.), then add up those costs. If you’re over budget, you can take measures to bring the cost down, like planning for a shorter term.
Estimates are great, but they can be done endlessly. Get your genuine price by contacting us at 808.897.9080, or requesting an actual quote by filling out our quote request form below.
Please reach us at info@insured.care if you cannot find an answer to your question.
Term life insurance is a type of life insurance that provides coverage for a specified period of time, known as the term. It is designed to provide financial protection to the policyholder's beneficiaries in the event of their death during the term of the policy. If the policyholder dies within the specified term, the beneficiaries will receive a death benefit payout. However, if the policyholder survives the term, the coverage ends and no benefits are paid out. Term life insurance is generally more affordable than permanent life insurance policies, but it does not build cash value or offer lifelong coverage.
The length of term insurance that is right for you depends on your specific needs and goals. Here are a few factors to consider:
1. Financial obligations: Consider the length of time you have committed to invest in your financial obligations, such as a mortgage or supporting dependents. You may want a term that aligns with these obligations, such as a 20-year term if you have 20 years left on your mortgage.
2. Income replacement: If you want to provide income replacement for your dependents in the event of your passing, consider a term that covers the years until your dependents become financially independent, such as until they finish college or reach a certain age.
3. Budget: Longer-term policies generally have higher premiums. Consider your budget and how much you can afford to pay for insurance coverage. Shorter terms may be more affordable but may not provide coverage for as long.
4. Future needs: Consider any future needs you may have, such as planning for retirement or leaving a legacy. If you anticipate needing coverage beyond a certain term, you may want to consider a permanent life insurance policy.
Ultimately, it's important to evaluate your specific situation and speak with a licensed insurance professional who can help determine the length of term insurance that best suits your needs.
A term life insurance policy covers most deaths resulting from accidental and natural causes. There is a two-year contestability period in cases of suicide. This means a policy won’t pay if there is a suicide within the first two years - all premiums paid will be returned to the beneficiary.
Situations involving fraud and material misrepresentation will be investigated by the carrier and may be denied. All claims are reviewed and if needed, investigated, by the carrier that issued the policy.
The death benefit can be used by the beneficiaries to cover various expenses, such as funeral costs, outstanding debts, mortgage payments, or to provide financial support for dependents.
Unlike permanent life insurance policies, term life insurance does not accumulate cash value over time. It is generally more affordable and straightforward, focusing solely on providing a death benefit during the specified term.
It is important to note that term life insurance does not provide coverage for the entire lifetime of the insured, and the policy will expire at the end of the term unless it is renewed or converted into a permanent policy, if available.
Determining whether your life insurance through work is enough depends on various factors, such as your financial obligations and goals. Here are a few points to consider:
1. Coverage amount: Evaluate the coverage amount provided by your employer. Is it sufficient to cover your outstanding debts, such as a mortgage, loans, or credit card balances? Additionally, consider whether it would adequately support your family's ongoing expenses, such as housing, education, and daily living costs.
2. Dependents: If you have dependents, such as a spouse, children, or aging parents, it's essential to assess whether the coverage amount would adequately support them if something were to happen to you. Consider their future financial needs and whether the policy would provide ample support.
3. Portability: One drawback of relying solely on employer-provided life insurance is that coverage usually ends when you leave the company. If you change jobs or retire, you might lose your life insurance coverage. It's important to evaluate whether your policy can be converted into a portable individual policy or if you can secure coverage elsewhere.
4. Additional coverage: If the coverage through your employer is insufficient, you might consider supplementing it with an individual life insurance policy. This will ensure that you have enough coverage to meet your specific needs and financial goals.
5. Cost: Assess the cost of obtaining additional coverage independently. Though employer-provided coverage is often more affordable, it's important to evaluate whether the price of individual coverage is reasonable given your requirements.
It is generally recommended to consider life insurance when you have dependents or financial obligations, such as a mortgage or outstanding debts. Additionally, obtaining life insurance at a younger age may result in lower premiums. It would be best to lock in lower premiums now, because the price will only grow higher further out as time passes.