The amount of life insurance coverage you should carry is based on income levels. However, this may not be an appropriate measurement for everyone, says a report in the Chicago Tribune.
Author Tim Maurer stated in the Tribune report, that consumers should consider total life insurance coverage needs by combining four main categories.
- Final expenses
- Mortgages/debts
- Income replacement and
- Educational funds
These will vary widely depending on the number and age of a family’s children, amount of money owed on a mortgage and overall income level.
According to the Tribune, Maurer also warns that educational costs can be difficult to accurately calculate. This is due to the highly changeable rate at which tuition increases each year.
When purchasing life insurance, many forget inflation. If you are interested in a long term policy, this is a major area of consideration. Inflation costs in health care have also dramatically increased.
Consumers must also decide whether to purchase term-life or whole-life policies. While both types of plans can provide the same overall coverage amount, they provide it for different lengths of time. Furthermore, each term lengths varies in cost.
Once purchased, always review your life insurance needs which may include adding a spouse, children or purchasing a new home.