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From reviewing current financial obligations to considering future changes, we’ve compiled five helpful tips for evaluating your life insurance needs.
In the event of your passing, having sufficient life insurance in place is vital for providing financial support for your loved ones. Below are some basic tips that can help you make informed decisions when pursuing the right amount of coverage.
Key Tips for Determining Life Insurance Needs:
Start by calculating your current financial obligations in terms of mortgages or rent, car loans, student loans and credit card balances. Also, consider future expenses such as funeral costs, end-of-life care, estate planning, college tuition for your dependents, contributions to your favorite charitable causes and, of course, ongoing living costs. Ultimately, your policy should be able to cover a number of necessary expenses.
Next, estimate the income your beneficiaries would need to cover daily living expenses and maintain their standard of living. It’s especially important to have ample funds available to address potential health care needs and emergencies.
Note: When calculating these income-replacement needs, a common rule of thumb is to multiply your annual income by 10-15 times. You can adjust this figure accordingly based on your family’s specific needs and future financial goals.
Review your savings, retirement investments and any other assets that could contribute to financial freedom. Don’t forget to account for any existing life insurance policies or coverage provided by your employer or other benefactors.
It’s important to remember that your needs may change over time. Be mindful of life events that could affect your requirements, such as marriage, divorce, the birth of a child or career changes.
When it comes to having the right amount of life insurance, working with an experienced advisor is crucial to accessing personalized insights and evaluating your policy options. They’ll help you navigate numerous calculations and factors you might otherwise overlook, such as which of the following types of life insurance you should have:
Term life insurance: This provides coverage for a specified period, usually at lower premiums. It’s suitable for temporary needs, like raising children.
Whole life insurance: A lifelong coverage option that can build cash value, this might be more suitable for long-term financial planning.
It’s also important to review life insurance needs with your advisor regularly – we recommend at least once a year, and especially after major life events. That way, you can adjust your coverage as necessary to reflect changing life circumstances, whether they're personal or business in nature.
For additional assistance in gauging your ideal coverage, try out our life insurance calculator as a helpful starting point!
Determining the right amount of life insurance is key to protecting your family’s future, and by utilizing these tips and best practices, you’ll be in a good position to assess your needs and make informed decisions. Contact our professional insurance team today to start tailoring a plan that inspires confidence for you and yours.
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Products and services offered through Gate City Insurance Agency are not FDIC-insured; have no bank guarantee; are not a deposit; are not insured by any federal government agency; may lose value.
