Having life insurance can be very important to ensure your family is taken care of. While having a plan is a good idea, it can be very easy to over-insure yourself. Being overinsured is not an ideal situation because you are probably paying too much money on monthly premiums for not much more.
To ensure you are not over-insuring you need to figure out your insurance needs. This will help you know how much you will need to insure. There are six areas to focus on to help you figure out your insurance needs.
First, look at your income needs. You will need to list your annual income, current age, retirement age, annual inflation rate, Annual asset interest rate, and assets needed to cover annual income needs.
Second, you need to look at future education needs. You will have to figure out the annual cost per child, education inflation rate, educational asset interest rate, how many children you have and their age, and the total assets needed to cover future education needs.
Third, list any liability payoff needs you to have. List the immediate payoff value. Fourth, find out your current usable liquid assets. Fifth, list your current life insurance benefits.
Lastly, you need to figure out your total life insurance needs with all of the above information you’ve gathered. List your income replacement needs, future education needs, liability payoff needs, current usable assets, and current life insurance. This will let you know any additional life insurance you may need.
