With enough life insurance coverage, you can be sure that your loved ones will be taken care of financially once you pass out. With the life insurance calculator, you’ll know how much you need to secure.
How Life Insurance Calculator Works
The easiest way to find out your coverage needs is with the use of the life insurance calculator.
You just need to enter your annual income, and the number of years your dependent will need financial support, your debt, future college costs, funeral needs, savings, and any other life insurance coverage-and there will be an instant result.
With the three-step process of the life insurance calculator, you’ll know your coverage needs, and how much it will cover.
How to Make Use of the Life Insurance Calculator
A good estimate of your life insurance needs requires using a formula that includes your future financial obligations and assets, such as savings (which your loved ones will use to survive financially when you die).
To know the amount of life insurance you may need, simply follow the steps below, and then the life insurance calculator will do the rest.
- Enter your annual income and the number of years of income you want to cover.
- Enter your debts & future costs you want to cover.
- Enter your savings and any current life insurance coverage
See an example of how the life insurance works in the table below:
|Years of replacement income you may need||10 years|
|10 years of replacement income||$500,000|
|Savings to be spent by family||$200,000|
|Total life insurance you may need||$600,000|
Tips for Calculating How Much Life Insurance You Need
Keep these tips at the back of your mind when deciding your life insurance needs:
- Tip 1: Figure out the type of life insurance you need, which might include term life insurance or permanent life insurance
- Tip 2: Take note of other life insurance policies
- Tip 3: Check other life insurance benefits
Manually Calculate How Much Life Insurance You Need
Aside from using the life insurance needs calculator, there are other ways to estimate how much life insurance you need. Below are four options:
- Option 1: Multiply your annual income by 10: This is the fastest method to acquire an estimate, but because it doesn’t account for things like debts, a mortgage, and the children’s future educational demands, it can leave you underfunded.
- Option 2: Multiply your annual income by more than 10: Your unique status, expected demands, and current assets are not taken into consideration by just increasing your yearly income by a seemingly random amount.
- Option 3: 10 times income plus $100,000 for college: If you have kids who need to go to college in the future, you could raise your income by 10 and add an extra $100,000 to cover college expenses. However, this is not a reliable way to figure out how much life insurance you need.
- Option 4: The DIME method: The DIME (Debt and Final Expenses; Income; Mortgage; Education) approach offers an approximate estimate and considers more life insurance factors than just doubling your income, but it ignores savings and child care expenses.
Compare Life Insurance Companies
Once one knows his/her life insurance needs, he/she can start scheming for a policy. Compare life insurance quotes from multiple companies to see the one that offers you the best price.
From company to company, life insurance rates vary, therefore, when you compare quotes online or work with an independent life insurance agent, it can help you find the best life insurance rates for both your age and health.