One of the most important financial decisions you’ll ever make is choosing how much life insurance to buy. The amount you buy is based on your specific needs and risk profile. It will help your family and loved ones cope financially if you die unexpectedly, so you must make the right purchase decision.
Depending on the life insurance coverage plan you take out, it will provide immediate cash payments or a cash lump sum when you die. Make sure you consider all your debts, loans, mortgage, and other monthly expenses when calculating your life insurance and selecting your coverage amount. Here’s what you need to know!
Make a list of your debts and expenses, such as your mortgage, car loan, credit card bills, alimony and child support payments, utility bills, medical expenses, and more. Then determine how much each of these costs per month to calculate the total amount you need to be covered each month should you die. This will give you a good estimate of how much life insurance you need.
Different life insurance companies have different policies and coverage plans, so it’s important to do your research and find the one that’s right for you. You can choose between term life and whole life insurance, and each has its advantages and disadvantages depending on your needs.
Term life is usually cheaper since you only need coverage for a set period of time. On the other hand, whole life insurance has cash value and can build over time, so you can access that money later on.
It’s a good idea to consider how long you’re likely to continue working after taking out a life insurance plan. If you don’t expect your income to change over time or you’re the sole breadwinner for your family, you may want to opt for a larger policy to cover a longer time. If you’re expecting to retire within the next few years, you may consider scaling back on your coverage to maintain a lower premium.
If you have assets you need to take into account when deciding how much coverage to take out, you’ll need to estimate the value of your savings, property, vehicles, jewelry, and other valuables. An accurate estimate of your assets will help determine how much life insurance you need should anything happen to you.
Here are some factors that will determine how much life insurance coverage will cost:
Life insurance companies tend to charge more for people over a certain age because the risk of them dying is higher. As a result, life insurance premiums tend to be higher for older people.
Your health is another major controlling factor in determining the premiums you’ll pay. The healthier you are, the lower your rates will be and the more you’ll have to pay if you’re a smoker or have health problems.
If you regularly participate in dangerous sports or other risky activities or have a hazardous occupation, your rates will likely be higher than they would be otherwise.
Likewise, if you lead a sedentary lifestyle, your insurance company may assume you are more likely to get sick or die earlier than someone who exercises regularly.
If you are uninsured or underinsured, you may feel worried about how you will make ends meet should you unexpectedly pass away. Therefore, insurance companies take your financial history into account when checking if you qualify for a good insurance rate.
If you have plenty of debts and a low credit score, you should expect to get an insurance coverage plan that’s more expensive.
If you’re looking for a life insurance coverage plan that will help you protect your family in the event of your demise, or you want to get life insurance as your retirement plan, Franklin Life & Annuity should be your first stop!
Get in touch with us today to learn all about our offerings.