Life Insurance Calculator
Having a life insurance policy is one of those insurance products that we don't really like to think about, but it's pretty important- especially if we have loved ones that rely on our income. Not only is it important to have life insurance, but it's important to understand how to calculate how much we need. And if we're going to make the effort to make sure we have it, we might as well make sure it's the right amount; why pay for more than we need, and why short ourselves if we really need more.
When I began working in insurance sales I found that I'd sit with clients and offer life insurance, but as we'd make progress I quickly realized it was more than just a ballpark figure, and I have to admit, the first few policies I sold were "ballpark." This lead me to do a little more research to figure out how to establish a fairly quick and easy calculation of what someone needs for life insurance, with quantified results. To make sure they had enough coverage to cover their needs and to make sure they didn't buy more than what was necessary.
I don't want to be redundant, because the calculator pretty much outlines what I'm about to say, but as we were taught in the military; tell em' what you are about to say, then say it, and finally, recap on what you just said... then no one can say they didn't hear what you said- You just said it three times! That was supposed to be humorous, hope it didn't come out too "grizzly."
Step one you will review your income and assets. This includes your annual income, your investment income (such as rental properties, dividends, annuities, etc.), and your liquid assets (those things you own that can be sold for cash value within 3 months). It is advised that you do not consider your retirement accounts in this section due to the pretty stiff tax penalties. We will consider annual income and determine how many years you want your significant other to have your income, in the event of death.
Step two we look at debts and expenses. This is broken down into 3 categories; home, loans & credit, and final expenses (dying isn't cheap! It costs about $10,000 - $15,000 for a funeral). In this segment include car loans, credit cards, equity lines of credit, and if you own a business you will want to include these loans as well.
The final aspect we will review is what we spend on our child(ren) on a monthly basis, how many years we'd like them to receive that amount and how much money we would like to set aside for their college fund.