People get quotes for life insurance online all the time. Most of the time, people ask for quotes for standard amounts between 50,000 and 500,000. Most people haven't taken the time to figure out how much life insurance they need, based on the amounts they ask for. This often causes policies to end early because a real need wasn't established when they were bought. It is very helpful to figure out what you really need and then buy the right amount.
Basic Needs: Buy enough life insurance to cover the most important things.
- Mortgage Balance: Add the amount you owe on your mortgage to the total cost.
- Final Costs: These are your basic burial costs. Pick a number and put it into a calculator.
- Short-Term Debt: Add up all the balances on your instalment loans and credit cards to the totals for your final expenses and mortgage.
Now you can buy a life insurance policy based on how much you really need.
Additional Income Needs: The next level of a needs-based plan could include a certain amount of life insurance to replace income for a period of time that you choose. You might want to leave your beneficiary five years' worth of your current income in case you die. This will give your family time to find other ways to make money. Now you can add this amount to the amount of money you need for basic needs to see if the total will fit into your budget.
Educational Needs: You can also buy a certain amount of life insurance to put into a fund for your child's education. You can figure out how much college will cost in the future by multiplying inflation by the number of children in your home.
These are just a few of the most important needs and reasons to buy life insurance. A mini-need analysis is not that hard to do. You may save yourself some premium dollars because you have taken the time to determine how much life insurance that you actually need instead of purchasing a random amount.
