Life Insurance Calculator: How Much Protection Would Be Enough?
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A life insurance calculator is an online tool that you can use to quickly determine your insurance coverage requirements. You may quickly receive a result by entering your yearly income, the number of years your family will require financial assistance, your debt, anticipated college expenses, your savings goal, and any additional life insurance coverage.
Using Life Insurance Calculator
The method you use to calculate your life insurance needs must take into account both your current financial responsibilities and any valuables, such as savings, that your family members might be able to use in the event of your passing. There are some steps you would have to follow to calculate how much life insurance will be perfect for you and your family.
- Add the number of years that your family members will require that wage to your annual income.
- Add up all of your financial commitments, such as your mortgage, upcoming education expenses, credit card debt, and loans.
- You should now deduct your assets.
- The result will be the amount you would need to support your family in the form of life insurance.
Manual Calculation for Life Insurance
There are several methods to calculate your life insurance requirements besides utilising the calculator.
1. Ten times your annual income
The simplest and least effective technique to acquire an estimate is to multiply income by ten. Your annual income is multiplied by 10 times.
However, employing this strategy can leave you gravely underinsured. It doesn't consider a lot of important elements that should be considered when calculating life insurance. These elements include your bills, your mortgage, and the educational demands of your future children. It also disregards stay-at-home parents, whose contributions to the household are crucial despite the fact that they might not be paid.
2. Increase your yearly revenue by at least ten times
Ten times your salary might not be sufficient. However, as already indicated, increasing your annual salary by a seemingly random amount does not take into account your unique circumstances. It is preferable to utilise a life insurance calculator that takes into account potential assets as well as projected demands.
3. DIME Procedure
The DIME approach takes life insurance into account in addition to your income multiplied. DIME translates to:
- Debt and ultimate costs: Assess all of your liabilities, including credit card and loan balances, as well as anticipated ultimate expenses like burial costs.
- Income: Calculate the annual financial support your loved ones will require, then multiply that amount by the number of years they will require it.
- Mortgage: Make sure you are aware of your mortgage balance.
- Education: Consider your children's future educational requirements, particularly their college demands.
Add together all of those costs, and you should be able to determine how much insurance coverage you require. You should be aware that the DIME technique does not account for your savings or expenses like child care.
Conclusion
All the above-mentioned ways can be enough to help you calculate the amount of life insurance you would need to sustain your family in the near future. It is easy to make calculations using the method and then invest the right amount of money to get appropriate results in the future.
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