How Much Life Insurance Do I Need ? – What Does it Cover?

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How Much Life Insurance Do I Need – Just like taxes, death is unavoidable and inescapable. However, some people take it for granted. But I am here to convince you that it is worth getting. So, if you are curious about how much insurance you should have, this article is right. If you do not want your family to suffer if or when you leave the surface of the earth, then purchasing life insurances are good places to start. But how much life insurance you need should be the question popping up in your head.

How Much Life Insurance Do I Need ? - What Does it Cover?

So, by getting it, you can be sure that your family can put their mind at ease and that the financial aspect is covered as well. One of the things that you can use to calculate how much life insurance you need is a Life Insurance Calculator. Moreover, it also covers burial and funeral expenses. What’s more, the policy can also cover existing debts and day-to-day living expenses to reduce the burden of those you have left behind.

What Is Life Insurance?

Life insurance is an arrangement that exists between the insurance company and the insured party. So, as a policyholder, if you die one day, there will be a certain amount of money that will be paid after your demises.

Furthermore, this amount is referred to as a death benefit. Now, you can set and put your mind at ease because your family does not have to suffer after you are gone.

Who Needs A Life Insurance?

Everyone needs life insurance but it is necessary for young parents. People who also need it includes:

  • People with high net worth.
  • Single mothers.
  • Young couples.
  • Business owners.
  • Parents of special-needs children.
  • A person with co-signed student loans.
  • Single parents with no children.
  • Breadwinners.

And stay-at-home parents.

At What Age Should You Get Life Insurance?

If you are making plans to apply and get life insurance, the perfect time to do it is in your 20s. Apart from being able to get a quote, you can also purchase coverage that will be useful later in the future. Plus, it is the age when you are healthy and young. So, you can make good decisions and choices.

What Does Life Insurance Cover?

By getting it, your family will be provided varieties of coverages. Moreover, these coverages are also provided by the insurance company. They include:

  • Accidental cause.
  • College costs.
  • Natural causes.
  • Homicide.
  • Child care.
  • Suicide.
  • Funeral cost.
  • Daily expenses.
  • Pandemic illness.
  • Debts.

So, while you are still alive, you can select coverage options that you would like the company to provide your family.

What Does Life Insurance Not Cover?

There are certain types of death your life insurance will not cover after you are gone. They  include the following:

  • Rock climbing.
  • Skydiving.
  • Auto racing.
  • Scuba diving.
  • BASE jumping.
  • Mountain climbing.
  • Hand gliding.
  • Alcohol use.
  • Existing medical conditions.
  • Drug use.
  • Travel plans.
  • Family health history.
  • Criminal death.
  • Risky activities.

If you ever engage in any activity that may cause your death or you take part in any of the activities mentioned above, then your life insurance will not cover you.

How Much Does Life Insurance Cost?

The cost of getting or buying life insurance varies. Furthermore, a lot of companies that offer this type of insurance also have a specific amount that you will have to pay to get or buy your policy or quote.

But the average cost of life insurance is $26 per month in the United States. In the meantime, countries also have different life insurance prices. So, you can check out the price of this type of insurance online.

Is Life Insurance Worth Getting?

Yes, getting life insurance is 100% ideal. Firstly, you make life a lot easier and more comfortable for your family and loved ones. Secondly, they are also ready for unexpected expenses. Plus, you can feel at ease because your mind will be at peace.

So, if you are gone with your policy term, with the quote and policy you have prepared, there will be a ray of faith and comfort for them. Moreover, you can be sure that they are living a standard life.

How Much Life Insurance Do I Need?

There are different ways to calculate how much life insurance you need. As mentioned earlier, one of the most efficient ways is using a life insurance calculator. Moreover, there are insurance companies that provide these calculators for people so, you can go online to find out.

 But if you want to carry out this activity manually, there is also a way to calculate and find out which are:

  1. To begin, sum up:
  2. Your annual salary is multiplied by the number of years you want to alternate that income amount.
  3. The amount used to replace stay-at-home services provided.
  4. Other existing debts.
  5. Funeral costs.
  6. College fees and other future expenses.
  7. And mortgage balance.
  8. Next, after you have added up all of the above, subtract or minus liquid assets. Liquid assets are known as existing policies, savings, and current college funds.

At the end of everything, the number or amount that you have left or got is the number of how much insurance you need.

Other Ways To Estimate Your Required Life Insurance

I have already informed you that there are multiple ways that you can calculate how much life insurance you need. Below, I will be giving 3 additional formulas or steps that you can use if you want to find out. They are:

  • The DIME formula.
  • Multiplying your income by 10.
  • Purchasing 10x your income, plus $100,000 for each child for college expenses.

The DIME Formula

With the DIME formula, you will be able to take a closer look at your finances. Furthermore, DIME represents Debt, Income, Mortgage, and Education. So, these are the four corners that you need to resolve when you are calculating.

To use this formula:

  • Sum up your debts as well as other mortgages and evaluate your funeral expenses.
  • Choose the number of years you want your loved ones to be supported. Then, multiply it by your annual income.
  • Next, evaluate how much is required or needed to settle and clear your mortgage.
  • Lastly, calculate the cost of sending your children to college and school.

Once you add up all of these, you will get a total of how much you need for it. Moreover, this is a very comprehensive formula to start with.

Multiplying Your Income By 10

This is another way to find out how much insurance you need. However, your family’s need is not looked into deeply. Moreover, it does not also provide compensation for stay-at-home parents. But with this method, the replacement of a stay-at-home parent work will be performed if she or he dies.

Purchasing 10x Your Income, Plus $100,000 For Each Child For College Expenses

Purchasing 10x your income, plus $100,000 for each child for college expenses is very similar to the 10x income rule. But the only difference is the addition of your child’s education cost. This method does not also look into your assets, family needs, and existing coverage.