If you've been shopping for life insurance - especially via the Internet - then you have likely come across various life insurance needs assessment calculators. Some of these recommend that you take the amount of your annual income and multiply it by a set figure, while others will simply have you add up all of your debts in order to come up with the amount of protection you should have.
But unfortunately, by following these simple needs analyses, you could be doing yourself - and those who are counting on you - a disservice. That's because, just like all families are different, so are all families' life insurance needs.
With that in mind, it can take a bit more in-depth figuring in order to determine the proper amount of life insurance protection that you should have. But doing so can be well worth the effort - particularly if the unexpected occurs.
So, how do you determine the right amount of life insurance coverage? There are several parameters to take into account. First, calculate your financial obligations. Here, for instance, you should take your annual income and multiply it by the number of years that you will need your income to be replaced.
If you are a stay-at-home parent, you will want to consider the cost to replace the long list of services that you provide, such as child care, meal preparation, car pooling, etc. - all of which could end up to be in the mid-five figures per year.
Next, add the amount of any mortgage balance you have to your other debts - both current and future. As an example, you may have current debt obligations like a vehicle loan and / or a personal loan.
As far as future debt, you'll need to factor in the anticipated cost of sending your child(ren) to collage, as well as the cost of a funeral and other final expenses that you could incur. (Presently, on average, final expenses run in the neighborhood of $8,500).
Once you've come up with a figure, subtract any liquid assets that could be used towards your loved ones' future financial needs. This may include savings and / or investments, as well as any current life insurance that you already have. The amount of the difference will signify the amount of additional coverage that you require.
For many people, one of the key purposes of having life insurance is income replacement and debt payoff. This is articularly the case for those who have a spouse and / or children who are depending on their ongoing financial support.
Unfortunately, most group life insurance coverage doesn't offer nearly enough protection. In fact, in most cases, these plans will really only provide your survivors with the bare minimum. So, if you have anyone counting on you financially, then it is much more beneficial to ensure that you have enough protection through an individual policy. An additional downfall to relying solely on group life insurance coverage is the fact that you may or may not be able to take the plan with you if or when you leave your employer. Plus, waiting too long to purchase individual life insurance could put you at risk of paying higher rates - or even of being uninsurable, due to an adverse health condition. So, it's best to lock in personal protection sooner rather than later.
While there are many companies in the market place that offer life insurance, finding the right type and amount of coverage on your own can be somewhat time consuming. It can also be difficult to compare plans and premiums, too, if you are going from one insurer to another on your own.
There is a better alternative, though, for shopping and comparing a wide array of coverage options side-by-side, and in an unbiased manner. That's by working with an independent insurance professional.
In doing so, you will be able to review life insurance coverage alternatives from a long list of top-rated carriers in the industry. From there, you can pick and choose the policy that best works for you, and for your budget.