If you've decided that it's time to invest in life insurance, one of the biggest decisions you'll have to make is the benefit amount of the policy that you buy. After all, one of the biggest reasons to invest in life insurance coverage is to ensure that you have enough money on hand for your loved ones to deal with what's necessary. When you're new to shopping for life insurance, you might not know how much you should be buying. Here are a few of the things you should think about when you're deciding on the death benefit you need.
How Much Do You Estimate Your Funeral To Cost?
One of the priorities of life insurance is usually to cover the cost of the funeral service and burial or cremation. In fact, there are some life insurance policies designed just to cover those costs. If you have one of those policies already, you won't need to worry about this figure in your calculations.
If not, you'll want an estimate of your funeral cost to ensure that it's covered. Since some funeral services can cost more than $10,000, talk with a local funeral home about the average pricing in your area. Including the cost of your memorial and burial or cremation in your life insurance calculation ensures that your family isn't left trying to determine how to pay for your final services.
What Kinds Of Debts Do You Still Need to Pay?
Once you're certain that your funeral services are covered, it's time to think about your other financial responsibilities. If you have any outstanding debts that will need to be paid, they will become part of your estate and must be settled using the assets left behind. By including your best estimate of your outstanding debts, you'll ensure that your family members don't have to find any other way to foot the bill.
In addition to including what you can in your life insurance policy, you should also think about taking out loan life insurance or other protection for your credit card accounts and any other loans you take out. Most auto loans, mortgages and other similar financing also include provisions for life insurance protection to settle the balance in the event of your death.
How Much Does Your Family Need To Get Through?
Especially when you are the primary income earner in the house, it's important to think about replacing your lost income when you calculate your insurance benefit. Think about how many years of salary you want your family to have in order to help them make the transition and move forward without you. For example, you may want to give them five years of your salary to allow for transition. This eases the strain on your family when they find themselves down an income source while still having the bills to pay.
Do You Want To Create A Trust Fund ?
If you have children and you want to leave them a fund that they can use to pay for college or future investments, this is the time to cover that as well. You can include any trust fund amount in your life insurance policy, and then ensure that you have a will written up that clearly defines how you want those funds to be handled after your death. The executor of your estate can ensure that your wishes are carried out.
Life insurance coverage is a very personal calculation. Now that you understand some of the key factors that you should consider when buying, you'll be in a better position to get the coverage that your family will need. Contact an insurance provider, such as Health Shop Inc, for more information.