- Sarah Smith, Tenaya Insurance
How Much Life Insurance Do You Need?
This is a question that many people ask, but the answer is never the same for everybody. This is because there is no "one-size fits all" solution. What you need is going to be completely different than the person next to you, and so on and so on. Everyone's in a different stage of life, some have kids, some have elderly parents they're caring for, some are business owners, some aren't.
Sometimes when talking with a client they say something like "I need $100,000 in life insurance." My reply is "Okay, how did you arrive at that number?" In my experience I've found that most people haven't done a lot of calculations or thorough checking into what will be needed for various things, or how they got to that number, but instead it just "sounded like a good number."
That number might be close to what they need, or it could be way off-base. Before you apply for a life insurance policy, it's important that you determine how much coverage you really need. A good rule of thumb : Take the breadwinners salary and multiply it by 15, and then add any outstanding debts that you might have. This will ensure that your family will be taken care of for years to come. The alternative is, let's say the breadwinner makes $100,000 a year. You have a $100,000 life insurance policy. That policy is only going to cover your family for one year. Then what are they going to do?
Adjusting to the loss of the breadwinner takes time. They need to figure out how they will replace your lost income going forward, and sometimes that involves going back to school to further their education, or decide what they want to do career wise. Life insurance is the peace of mind that the huge burden of how they're going to pay the bills in the meantime has been taken off of their shoulders.
The good news? A good life insurance agent is used to determining how much coverage you need. We're aware of all of the questions that you should be asking yourself to make sure that you're thinking of everything. Online calculators can be a good place to start, but nothing beats a human in being able to ask what your concerns are, what your goals are for your future, and being able to customize a solution to accommodate that. Then once we've determined how much you need, we shop the market to find you the very best solution to fit your needs.
So to sum it up, when asked "how much life insurance do I need?", the answer should be "before I can accurately answer that, tell me more about you, and then let's go from there."
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