If you ever have a question about how much life insurance you need, do NOT ask a life insurance agent. While there are some good agents out there that will be completely honest with you, there are still plenty others that are looking for a big cash payout at your expense. If you hang on their every word, chances are that you’ll buy way more life insurance than you’ll ever need. Just remember that if you ever need more information you can always get a Suncorp life insurance quote.
What Are Your Yearly Expenses?
In order to find out how much life insurance you need, you must first gain an understanding of how much money you spend every year. For the average small family, I would say that you most likely spend a little over $35,000 per year (that is, if you are spending within your means). If you happened to pass away tomorrow, you would most likely want your family to be worry free for at least 10 years after your passing. That should give them enough time to get back on their feet and figure out a way to make ends meet on their own. So, just with quick math, you would want to have a life insurance policy that paid out $350,000 upon your death. This, however, might not be enough.
Expenses If You Are Gone
Let’s say that your expenses are currently $35,000 per year, but that’s with your wife staying home during the day to take care of the kids. If you pass away before tomorrow, your wife’s expenses will suddenly grow to more than $35,000 because she will have to find a job in order to provide for the family. Suddenly, the expenses are $35k plus the expense of a daycare or nanny service. This could easily increase the yearly expense to $45k per year, which would mean that it might be wise to bump your policy up to $450,000 upon your passing.
How About Your Parents?
It doesn’t seem like our parents are retiring on a pot of gold these days. In fact, it’s just the opposite. Many elderly individuals are retiring with a sub-par retirement fund that will not last them for the rest of their lives. If they live beyond 80 years old, the bill will most likely be on you and your siblings. If this is the case and your parents are reaching that age, you might want to bump your life insurance up a little more.
Make It Doable With Term Insurance
I know what you’re thinking, “Bump up my insurance? This is going to be expensive!” It truly doesn’t have to be though. If you are younger than 40 years old and are in good health, you most likely can get term insurance for less than $25 per month. If something happens to you, the payout is sure to happen. If nothing does, then you don’t collect anything. But, by the time your term is up, you should be wealthy from the quality decisions you’ve made financially anyway.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.