Life insurance is an often overlooked but critically important part of financial planning. Regardless of how healthy you might be, if you have dependents that rely on your income for financial support, it’s important to make sure you have suitable cover in place – if only for peace of mind.
However, that begs the question: how much cover is suitable? To help Baltimore residents to figure out the answer that question and determine how much life insurance they really need, we’ve put together this short guide. Read on and we’ll explain everything you need to know.
The ‘x10’ Rule
An often-touted rule of thumb when it comes to life insurance is to aim for a cover that represents 10 times your yearly salary, which could be anywhere from $150,000 to $500,000 or more.
This is based on the fact that this figure will ensure your dependents don’t experience any financial impact for the immediate 10 months after you’re gone.
However, it’s important to remember that this is just a rule of thumb. The right amount of coverage for one family won’t be the right amount for another. Before you take out a policy, it’s important to try to determine your own coverage needs.
How to Determine Your Cover Requirements
The point of life insurance is to provide financial stability when you’re gone, which means any policy you take out should offer sufficient cover to account for your income for as long as you feel is necessary.
Therefore, you need to consider things like:
- Any outstanding debts you might have, and how this impacts how much would be left over to provide for your family’s regular monthly outgoings.
- How much cover would last until your children have finished education
- How much of your family income is provided by you
- Any other people that depend on you financially, like your parents or siblings
- Final expenses and estate taxes
- How inflation will affect your family’s future financial needs
- Any organizations you’d like to leave money to
- The amount of cover you personally would feel peace of mind with.
Consider all of the above carefully and use it to help you to calculate how much money would be a reasonable amount of cover.
How Cover Affects Your Premiums
Generally, the more cover you require, the more you’ll pay in life insurance premiums. Premiums are also affected by things like the type of policy (term vs permanent), the length of the term you want to be covered for, your age, your medical history, whether or not you’re a smoker, and many more factors.
Life insurance premiums can also vary dramatically between different insurance providers. To get the best deal possible, start by determining how much cover you’d need and a suitable term length, then shop around to compare prices. You can compare life insurance quotes quickly and easily using online comparison engines like Insurance Hero.
Hopefully, this information will help you to find the perfect life insurance cover for your needs. Good luck!