How Much Life Insurance Should You Buy?

Purchasing a life insurance policy isn’t easy for everyone. Most people are reminded about their mortality when faced with this decision. They don’t want to think about what’s going to happen to their loved ones when they pass on because they don’t want to think about that possibility. But, realistically speaking, nobody will live forever. If you are the one who provides for the stability of your family, then maybe you are in need of a policy. The next question is, how much life insurance should you purchase?

Many agents will misrepresent a policy just to sell it. They will give you the wrong kind of insurance accompanied with the wrong amounts. Of course, they want to think about their own well being as well. What you need is a trustworthy agent and company. Ask around. Read reviews. Research.

A life insurance’s purpose is to make up for a loss. If you passed on, what will your dependents need in order to be stable like before? If you have no dependents, then you might not need to get insured — because, if you did pass on, to whom will the cash value go to? If nobody is going to use it, then you just paid for a lot of premiums that are going to be of no use.

Since life insurance is supposed to insure that your dependents don’t have a difficult time, then you will need to figure out how much will keep them stable for some time. Many people have different ways of calculating this.

A basic way of doing this is by calculating how much your dependents spend in a month. Make a conservative estimate of how much time you could buy for your dependents as they cut costs and look for other options of raising income while you’re not around. Answers will vary, and maybe you’re the type of person who wants to purchase a policy that will take care of your dependents forever. Just remember: start with your monthly expenses and get a clear idea of how much you want to and need to spend on your policy.

You can also make a conservative estimate based on yearly expenses. Since most people look at incomes and expenses in annual increments, it might be easier to decide on an annual-expensive figure.

There are other various ways of computing for how much you need. An insurance agent will give you many options, and you have to decide on the most comfortable one. Here are some ways your insurers may compute for how much you need:

One option is to multiply your income by 17. This is a rough estimate, but it is said to generally work. Other insurance companies say that it’s a multiplier of your current income based on your age. For example, a person who is between the ranges of 20-30 years old may multiply his gross income by 20. Someone from 31-30 should multiply his gross income by 16. These are also rough estimates, and insurance companies should provide you with their own realistic calculations. Aside from those options, many insurance companies have calculators on their websites. These calculators will give you an estimate based on the values that you provide.