The only thing more certain than death is taxes, and most people would rather not think about either. If you have family, who relies on your earnings, you should take extra precautions to ensure their financial security in the event of your untimely demise.
Having life insurance can ease the financial strain on your loved ones by covering final expenses like funeral costs and burial costs, as well as debts and ongoing obligations like rent and food. Many people find life insurance as a helpful mode of finance, whether it’s to protect a growing family or make a donation to a cause dear to their hearts.
Your existing salary and resources, the number of people financially reliant on you, and the standard of living you and your household currently enjoy are just a few of the many factors to consider. On that note, let’s look at how much life insurance one needs.
Things To Consider Before Deciding On Your Life Insurance Coverage
Debt
In the event of the insured’s death, the death benefit can be utilized to settle financial obligations such as outstanding loans (such as those for a car or mortgage) or other expenses. Your policy’s coverage must be adequate to meet the total amount of these bills.
For example, if you owe $200,000 on your house and $4,000 on your car loan, you’ll need a minimum of $204,000 in your insurance policy to pay off your debts. However, don’t overlook the interest. Additional funds may be necessary to pay off late fees and interest.
Income Replacement
Income replacement is a major reason why people purchase life insurance. For instance, if you’re the breadwinner in your family and bring home $40,000 annually, you should look for a policy with a payout that is at least equal to your annual salary, preferably a bit higher to account for inflation.
Assume conservatively that your policy’s lump sum payoff is maintained at 8%. Your income needs to be completely replaced, which means you need life insurance of $300,000. Although it’s not a hard and fast rule, it’s often a safe bet to reinvest your annual revenue (in this case, $300,000 + $40,000 = $340,000) into your coverage as a hedge against inflation.
Once you know how much coverage you need, you can begin comparing prices. It is possible to estimate your insurance needs with the help of one of the numerous available internet tools.
Insuring Others
You could also consider if you should buy insurance for the other individuals in your life. Your general rule of thumb should be to only insure those whose passing would cause you monetary damage. However, there are real financial and emotional hardships that can result from losing a breadwinner spouse.
This individual’s income should therefore be used in the income replacement computation. Any company partnerships with whom you share financial obligations should be treated similarly. Take a co-owner of a house with whom you’re responsible for making mortgage payments as an example. In light of the significant impact their death would have on your finances, life insurance houston coverage for that person should be seriously considered.
How Much Life Insurance Should Someone Have & Why Is It Important To Know?
Using the life insurance basic rule of thumb, which is to purchase a policy with a face value equal to 10–15 times your annual salary, can help you determine the appropriate amount of life insurance coverage.
It’s the most prudent strategy to guarantee that your descendants will have long-term financial security, considering inflation and regular living costs. The easiest method to receive reliable life insurance quotations is to have a clear idea of your coverage needs before you start shopping around.
Most online pricing systems use a standard amount of coverage for a standard duration of time, but your family’s insurance needs are different. A quotation generator could offer you a potentially lower figure than what is reasonable if you’ve got more loans or a greater salary, leaving you astonished by the final premium.
If you or someone you know wants to get life insurance in Houston, Texas but isn’t sure how much coverage will be needed, Franklin Life & Annuity can help you out. We have been one of the most reliable life insurance companies in Houston for the last two decades. Whether you’re looking for family life insurance houston texas or final expense insurance, we have it all.
Contact us today, and we’ll help you get the coverage you need!