How To Calculate Life Insurance Needs
Life Insurance—Steps To Calculate Limits
If you are in the market for affordable life insurance, one of the first things you should think about before calling GEICO, is how much life insurance you need. Here is a quick way to estimate your life insurance requirements. Keep in mind that many financial planners recommend that you carry no less than ten times your annual income.
- Determine your current annual income or family contribution.
- Determine how many years your partner or children will need to replace your contribution.
- Multiply the annual contribution by the number of years. This is your full estimated contribution.
- Add up your existing assets that could be liquidated in the event of emergency.
- Add up your existing debts, mortgages, loans and other balances that would need to be paid. Include funeral expenses, medical bills and taxes.
- Subtract the debts from the assets to obtain your household "net worth".
- Add the net worth to the full estimated contribution amount. This will provide an estimated amount of family life insurance required to make sure the financial needs of your family are met.
The above-listed tips are for informational use only. Refer to your insurance policy contract for specific information regarding your coverages and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.