Generally life insurance secures the person’s life. So, for any one who is interested to secure their life, buying a life insurance is a good option. But, before going to buy an life insurance policy, you have to determine how much life insurance cover do you need? Buy the appropriate life insurance coverage which is affordable and sufficient for you. Here are few factors that can determine your life insurance coverage.
Estimate your debt: Before taking a life insurance, the first thing you have to estimate is your debt. How much debt do you have? List all your current debts. This includes your mortgage, loans, credit cards and so on. Don’t forget to allow for the interest on those loans. For example, if you have a $ 10,000 car loan, $ 150,000 mortgage, and $ 5 000 on your credit card, then your life insurance needs to be at least coverage of $ 165,000 just to pay your debt, $ 195000, if you allow the interest for your debts.
Income replacement: One of the biggest financial losses from which, life insurance protects you from is the loss of income. If you are the main earner of your family and you have several dependents, you should consider carefully what effect your death would have on your dependents. They could be your spouse, children, parents, etc. How can you take care of their needs, without your income? For example, if your current income is $ 24,000 and you estimate your life insurance payment could be invested at an 8 percent rate of interest, you will need a lump sum life insurance payment of $300,000 just to replace your income.
The future consideration: When planning your life insurance, you have to know what future expenses your family will have to cover. Do you have a college fund for your kids? Will your parents need financial assistance when they get older? Estimate how much money will your family need to cover future expenses and add it to your life insurance.
Once you have determined how much life insurance you need, you can start shopping around for different life insurance companies for the best deal.