How Much Life Insurance Do You Really Need?
Slightly giddy with the social stimulation of being back in the office after a year and a half at home, I took advantage of real, live human interaction to find inspiration for this article. As I walked through our work area, without preamble or elaboration, I asked a handful of my teammates: âWhat’s your number?
I returned to my office with three phone numbers, a “5 more wakes before the holidays” and a “I’m building a house and I broke.” As the person in charge of the financial preparation of the team, this was not exactly what I expected. Maybe that was wishful thinking, but I was hoping someone would respond with a retirement savings goal – or, better yet, a specific amount of life insurance coverage.
Understanding the amount of life insurance you need – and then tracking and getting it – is a cornerstone of financial security. I followed my initial request for a more specific question regarding life insurance. Unfortunately, my colleagues’ responses were still not very revealing, unless âenoughâ qualifies.
I hope you have had enough too. To be sure, let’s look at the potential cost of a number of major expenses. Understanding these costs can help you answer the most important question in life insurance: “How much do I need?” “
Raising a child: $ 233,610. This is the number I was leading with, and it’s scary. I’m not saying you necessarily need a quarter of a million dollars of life insurance for every child you have, but you should definitely consider their education. Social Security offers survivor benefits for the children of skilled workers up to the age of 17 (and for their guardian), so be aware that there is a bit of help on that front when you plan to protect your children. relatives.
Send a child to college: $ 88,000. Multiply the College Board’s estimate of the cost of tuition, fees, and room and board at a four-year public university by one year, and you get a pretty high number. Not all parents want to fully fund their children’s education, but if it’s on your list, it’s a lot to fit into your plan.
Pay the roof over your head: $ 384,000. In June, the Mortgage Bankers Association reported that this was the record average amount of a loan for a new home. For most of us, our mortgage is the biggest debt we will ever have. Make sure you have enough life insurance to pay off your mortgage and other debts.
Replacement of bacon you take home: $ 51,480. That’s the average salary of American workers today, according to the Bureau of Labor Statistics. Whether you do more or less, everything will be fine with you. What is your plan for those who remain?
To determine how much you need, do you just take those numbers and add them up? Of course not. But they could all be part of the calculation you use to get the ârightâ number. You should also consider available assets, your insurance, and existing benefits through Social Security, the Department of Veterans Affairs, and your employer.
A word of caution: what is right today may not be right tomorrow. Marriage, divorce, job changes, and other circumstances might force you to rethink your number. Make sure your coverage keeps pace with your life.
Fortunately, there are calculators like the one on the VA website that can do the heavy lifting. Take a few minutes today to see where you are at.
SGLI and VGLI may not be enough
Military group life insurance and veterans group life insurance may not be enough to cover your family’s needs. Explore life insurance options with our free tool, which compares rates and matches you with the coverage your family needs.
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