Having a life insurance policy in Coppell, TX not only secures the future of your loved ones, but it also gives you peace of mind. If you’re considering purchasing a life insurance policy, you may be wondering how much you need. The team at The Select Insurance Agency has put together this short guide to help you get started.
Calculating how much life insurance you need is simple. Here are two ways to do it.
Calculate to Reveal a Gap
You take your long-term financial obligations, such as mortgage and debt, and then subtract your assets. What is left is the gap that a life insurance policy would fill and this is the minimum amount you would want to purchase. To do this, add your salary to the number of years you want to replace that income. Is 10 years enough? Maybe fifteen? Add these to your mortgage balance, debt, and future costs such as burial expenses and tuition. If you’re a stay-at-home parent, be sure to include what it would cost to replace you and add this amount. From the total, subtract your liquid assets; cash, savings, 401K, and any other liquid assets you may have, including current life insurance policies. The remaining number determines the amount of coverage you need.
Use the 10 times Value
The 10 times value is a general rule of thumb to follow when trying to determine how much life insurance you need. This rule states that you need 10 times your current salary in life insurance benefits. For example, if you make $50,000 per year, you’ll need $500,00 in life insurance. However, keep in mind inflation and fluctuating interest rates that could mean you need more. If you have dependents, take on another $100,00 for each child.
To learn more about obtaining a life insurance policy, contact the team at The Select Insurance Agency, serving the Coppell, TX area.