How much term life insurance do I need?
Term life insurance can be a tricky product to purchase, given the huge range of options for coverage, length of coverage, and so on. However, the most common questions asked about term life insurance frequently fall under the category of “How much term life insurance do I need?” This guide will seek to answer this question so you can narrow the range of products you’re looking at and find the best term life insurance for you.
Step 1: What is Your Income?
The point of term life insurance is to provide protection for your family during the period of years you are working. This means that ideally you’ll be able to get a policy that roughly matches your yearly income for the term it covers. For example, if you are making $50,000 per yet, and you want a 5 year policy, then you should look for coverage options in the $250,000 range, as this will approximate the income you would have earned over that term, providing your family predictability and stability.
Step 2: What Are Your Extra Needs?
Sometimes base income isn’t enough, you may be planning to send a child to college or want to have the ability to pay off your home in the event the worst happens. If that’s the case you should calculate those costs into the amount of term life insurance coverage that you need to request.
Step 3: What Excesses Do You Have?
If you are fortunate enough to have your house paid off and/or your children’s education paid for, then you may want a lower amount of coverage to ensure that basic needs are met until your family can support themselves. This is also a way to save money on your term life insurance, as a lower amount of coverage means a lower monthly payment for you, which is always good no matter how much term life insurance you need!
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