There’s so much to learn when making the decision to get life insurance. It has an entire vocabulary of its own — term, whole, riders and beneficiaries. You’re bound to have some questions. But perhaps one of the biggest questions you need answered is, “How will I know what the right amount is?” Luckily, we have an easy-to-use tool to help you get started. Once you try our calculator, you’ll be ready to contact a representative who can help you choose the best plan for you.
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What does life insurance cover?
There’s not just one type of life insurance. There’s term life insurance, which will provide coverage for a certain number of years (10, 20 or 30), and there’s whole life insurance or universal, which offer protection throughout your life as long as premiums are paid. No matter what type of life insurance you choose, it can be used to pay for future expenses in many of the same ways.
One of the biggest items life insurance covers is the income a family loses after a death. This income would have been used to pay for expenses — like paying household bills for groceries and utilities, funeral expenses, the cost of raising children and their child care and college, and other financial obligations, like credit cards. These items can add up, especially when you’re without the support of that paycheck. Determining the living expenses you need to cover and the income you need to replace will go a long way to figuring out how much insurance you need.
So, how do I calculate how much life insurance?
Unsurprisingly, Gen Zers (49%) and millennials (47%), as well as women (44%), are more likely to report being underinsured.1
When it comes to figuring out how much you need, people tend to think about the amount they would need to pay off a big debt like a mortgage, but there’s more to it than that.
Traditionally, the rule of thumb is to have a policy with a death benefit equal to at least 6 to 10 times your annual income. This would ensure you have income replacement when needed. If you’re a stay-at-home parent, you should factor in the value of the work you do for your family, too.
Stay-at-home parents of two children in the United States do roughly 200 combined hours of labor that would cost between $4,000 and $5,200 per month to outsource in a handful of American cities.2
Of course, every family is unique and their needs are different. That’s why it’s a good idea to talk with a professional who can help guide your decision. They’ll ask questions about your specific needs and goals, then cater recommendations to your unique situation.
Is life insurance worth it?
When you consider the cost of getting life insurance, especially at a younger age, and weigh that against the long-term benefits and peace of mind you’ll gain by knowing your family is protected, life insurance is worth a look. At Modern Woodmen of America, our representatives can help to walk you through the process of applying for life insurance and all of the options available to you. They’ll even help you estimate how much coverage is right for your family.
Give us a call to start the conversation. You’ll be happy to know you’re helping your family stay strong for years to come.
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