When buying a life insurance policy, it is important to ask yourself, How much life insurance do I need? You should not start before you have totaled up your monthly expenses, your monthly income, your mortgage, and then figured out how much money your family would need to cover those items and your funeral. Granted, thinking about your funeral is not pleasant, but it is a necessity. Funerals are expensive.
You can use a handy online calculator like this one to figure out how much life insurance to get.
If you were to die tomorrow, your spouse, significant other, or living family members become responsible for your debt. If you have a mortgage for $300,000; $400,000; or $500,000, can your family truly afford to pay that off? Odds are high that they would need financial help; this is where life insurance comes in. Again, you will need to ask yourself, "How much life insurance do I really need?"
Take your monthly income. If your income is $2,000 a month, social security death benefits will pay your family a little. Many surviving spouses and children end up with $1,200 to $1,500 a month if you have been working for a number of years. This means your family will be short $500 to $800 every month. They will need at least that much from your insurance policy. If your spouse or family member invests the life insurance money wisely, he or she will be able to gain that much from dividends.
Other people prefer to take out enough of a life insurance policy to pay off the mortgage and loans. If a family is starting with a clean slate, they are often able to afford the rest of the bills on the amount that social security benefits will provide.
If medical bills are an issue, life insurence will most likely need to be used to pay off those excessive medical bills. Treatments for heart disease currently run upwards of $100,000 to $200,000. With this in mind, it can be devastating to a family who has lost their loved one to then be forced into bankruptcy by medical bills. Life insurance can help ensure their grief is not complicated by hefty hospital bills.
Planning ahead can offer you peace of mind. One simple question, "How much life insurance do I need?" is the best way to start.