How much life insurance should you have?
A question we’re commonly asked is how much life insurance should I have?
There are three primary approaches to calculate how much life insurance to buy.
The first approach is mirroring your colleagues/friends. Ask around to find out how much others have and buy a similar amount. This is the easiest approach but often results in too little coverage.
The second approach is buying a multiple of income. Insurance companies will offer up to 25 times someone’s annual income in life insurance. But this approach still works off of an estimation and not specific calculations.
The third approach is calculating how much income you want to provide for your family, how long you want the income to last, factor in inflation, taxes and investment return, add in any extra expenses you need to cover (like children’s college education), bring this to a present value, and then subtract out any assets.
The remaining gap is how much life insurance is advisable.
This obviously is the most detailed calculation by providing the most accurate amount based on your situation.
If you would like to explore the best approach for your life insurance, feel free to give us a call or text us at (704) 707-5788.
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