One important aspect of insurance, which is also time-consuming, is deciding on the amount of whole life coverage you should opt for. It will take you some research to arrive at an answer to this question. You will have to do a complete analysis of how your dependents can continue to lead the lifestyle they have been used to and also your current financial situation. Cost of schooling for children and the inflation costs should also be taken into consideration before arriving at a decision.
How to determine your whole life insurance coverage
As suggested by some experts in the field of life insurance, you should consider an amount that is eight to ten times your present annual remuneration. You can also base the estimate on the amount you will be able to earn from the present time till the time you retire. You might also want to consider the option of going in for an amount that will suffice to cover your current debts.
The “needs analysis” which is the sum of your short term needs and your long term needs excluding the resources on hand is the best way to arrive at a figure for whole life insurance according to expert professionals. Every time there is a significant change in your life like marriage, death or birth of a child, you will have to do this analysis.
Performing the “needs analysis”
- Consolidate all your short term needs. Current outstanding debts, financial expenses, and emergency expenses constitute short term needs. Funeral, hospital and medical expenses put together are the financial expenses. Loans taken for college, credit card loans and auto loans form part of the outstanding debts.
- Consolidate your long term debts. Tuition fees for college and mortgage are part of these debts. In order to arrive at the closest possible figure, consider in how many years your child will enter college and the current average college costs in the United States.
- Add up all your family expenses which include babysitting charges, clothing, entertainment, food, utility bills and transportation costs. Add up all the figures (family expenses, long term costs and short term costs).
- Next, consider all the resources you have on hand and deduct their charges from the total amount you have calculated. The final value you arrive at is the amount for which you should buy whole life insurance.
Get your free term life insurance quotes online and understand the simplicity with which you can get life insurance coverage online.