Calculating your life insurance amount
Pull out your calculators, peeps! It’s time to run the numbers and figure out how much life insurance you need. Don’t worry; you don’t need to be a mathematician to get this right. Try using this guide to ensure your family has some financial protection after your life.
Consider your yearly salary
The first step in calculating the amount you need in life insurance is to take your yearly salary and multiply it by the number of years until your youngest dependent becomes an adult (or 18 years old). For example, if you have one child who is currently 10 years old, you may decide to multiply your yearly salary by 8 to account for the years until he/she is independent.
Remember to think about college education
An additional expense to consider is the cost of your child’s college tuition and books. Currently, it costs on average around $13,677 in yearly tuition for public college, and that’s not including books or a 3% yearly increase due to inflation. The general rule is to add an additional $100,000 in coverage to your insurance policy for each child’s college education.
How much do you have left on your mortgage?
In your absence, would your spouse or partner be able to cover the cost of your monthly mortgage alone? You may consider adding the amount owed for your home to your life insurance policy. That way, in your absence, your spouse or partner is able to pay off the remainder of the loan and no longer has to worry about that expense.
Funerals can also get pretty pricey
I didn’t want to mention this one, but funeral expenses (and, yes, I mean yours ?) can be pricey. The average cost of a funeral in 2023 was between $7,360 and can vary based on your state. Should something happen to you, the last thing you want your family to worry about is paying for a burial or after life wishes. If you don’t already have all the accommodations paid for, consider adding an additional $10,000 to $15,000 to your life insurance policy.
And the total coverage amount is …
As you can see, the amount you may need for life insurance is customized according to your specific needs. Yearly salary, number of dependents, and the amount owed on your home vary by person. These numbers will guide you in figuring out the exact amount of coverage you may need.