As a responsible person with a financial obligations and a family, you certainly realize your need for insurance. Your goal is to purchase the right amount of insurance. If you're over insured, you're paying too much. But that is not as dangerous as being underinsured.
A simple formula can help you roughly calculate your life cover needs. Short term needs + long term needs - resources = the amount of cover you need. Use the following steps as a guide to begin your own needs analysis. Keep in mind, this is not an exact science, so use your best judgment when purchasing your policy.
Short-term needs: Begin by adding up all your short-term needs. These are the immediate needs your family will have upon your death, and generally fall into three categories: final expenses, outstanding debt and emergency expenses.
Medical expenses a result of your fatality, funeral expenses, attorney and executor fees, probate court costs and any outstanding taxes you would be obligated are termed as final Expenses. usage of Credit cards, vehicle loans, and education loans are outstanding debts. Emergency expenses such as medical treatment and emergencies, house renovations and repair, etc are cash reserve. you will have to overvalue the final expense as none can judge absolute hidden and crisis expenses.
Long-term needs: By using mortgage/rent amount and college Fees you can now calculate your long term obligations.
Figure out operating expenses like childcare, food, clothing, utilities, recreation, and transportation for the yearly needs and times that by how long you want your insurance to cover these expenses, then add those totals together.
After figuring out how much your family needs to earn, you can begin looking for those resources needed. Consider the sum of your available savings, investments, the insurance payout for death benefits if any is offered at work. Also, see if your family qualifies for any government assistance programs.
Selling any assets would greatly change your lifestyle and the list should look at liquid assets, not home or cars.
The bottom line: Now subtract your resources from the amount of income you will need to meet your family's total financial needs. This figure is a good guide to the amount of life insurance cover you should buy.
To be sure you remain adequately insured, you should complete an analysis like this every three years or whenever you have significant life change. Adding a new baby will cause you to readjust for childcare and college tuition costs. Because your mortgage is likely your largest financial liability you want to be sure you have enough cover to pay the balance. But remember, that balance decreases with every payment, so it is important to include this change in your assessment. - 15485
A simple formula can help you roughly calculate your life cover needs. Short term needs + long term needs - resources = the amount of cover you need. Use the following steps as a guide to begin your own needs analysis. Keep in mind, this is not an exact science, so use your best judgment when purchasing your policy.
Short-term needs: Begin by adding up all your short-term needs. These are the immediate needs your family will have upon your death, and generally fall into three categories: final expenses, outstanding debt and emergency expenses.
Medical expenses a result of your fatality, funeral expenses, attorney and executor fees, probate court costs and any outstanding taxes you would be obligated are termed as final Expenses. usage of Credit cards, vehicle loans, and education loans are outstanding debts. Emergency expenses such as medical treatment and emergencies, house renovations and repair, etc are cash reserve. you will have to overvalue the final expense as none can judge absolute hidden and crisis expenses.
Long-term needs: By using mortgage/rent amount and college Fees you can now calculate your long term obligations.
Figure out operating expenses like childcare, food, clothing, utilities, recreation, and transportation for the yearly needs and times that by how long you want your insurance to cover these expenses, then add those totals together.
After figuring out how much your family needs to earn, you can begin looking for those resources needed. Consider the sum of your available savings, investments, the insurance payout for death benefits if any is offered at work. Also, see if your family qualifies for any government assistance programs.
Selling any assets would greatly change your lifestyle and the list should look at liquid assets, not home or cars.
The bottom line: Now subtract your resources from the amount of income you will need to meet your family's total financial needs. This figure is a good guide to the amount of life insurance cover you should buy.
To be sure you remain adequately insured, you should complete an analysis like this every three years or whenever you have significant life change. Adding a new baby will cause you to readjust for childcare and college tuition costs. Because your mortgage is likely your largest financial liability you want to be sure you have enough cover to pay the balance. But remember, that balance decreases with every payment, so it is important to include this change in your assessment. - 15485
About the Author:
Tom Martens is the marketing director lifeinsurance-southafrica.co.za. South Arica'sleading Life Insurance portal
