It's essential to have a life insurance review to ensure that your needs are met through all of your life stages.
When purchasing a life insurance policy, it's important to choose the right amount of coverage. You don't want to pay for coverage that isn't needed, but you also don't want to leave your loved ones at risk.
Determining your life insurance needs
What kind and how much insurance coverage do I need?
There are two standard tactics to calculate how much life insurance you will require.
The lump sum need tactic calculates the total spending needed to pay for:
* Household expenses
* Emergency needs
* Educational costs
* Outstanding debts
* Funeral expenses
* Taxes
When you are determining your family's future financial needs, you don't have to provide 100 percent of the income that will be needed. For instance, if you are planning to provide $100,000 for your child's college tuition in 15 years, you don't need $100,000 now − you need an amount that will grow to $100,000 by the time college starts.
The income replacement method calculates the amount needed to replace a percentage of your income for a specific number of years, usually until your youngest child is out of college.
Calculating future economic needs
Your investment or life insurance professional can help you determine the right amount to buy to account for the time value of money.
