Purchasing a life insurance policy is a smart step in planning your future. It ensures that loved ones are protected financially in the event of your passing. There are different types of policies and coverage, and figuring out what you need can be daunting. Below are a few tips to follow.

How to Determine How Much Life Insurance to Purchase

1. Income Calculation

Life insurance should replace your income for your dependents if you depart, and it should cover about ten times what you make annually. It is also advised to increase the amount to make up for inflation, especially if you cannot guarantee the money will be invested after you are gone. Some people will hire a financial planner to help dependents with the payout and may include costs for their services in the final number. You may also calculate your needs by taking your annual salary and multiplying by the number of years you have until retirement.

2. Financial Support

Similar to calculating the loss of your income for dependents, you may consider a policy for someone on whom you rely for support. This can be a spouse, business partner, or partner on a property where a mortgage exists. Their death will have an impact on your financial standing, and a policy will ensure you can continue to cover costs.

3. Parent-Child Support

Each parent should have their own policy since both bring value to the family structure. Even if a parent doesn’t bring in an income, their place in the family is vital, particularly as a caregiver. For the parent without an income to calculate, consider the costs of child care if that person were to die. Then add $100,000 per child to cover college expenses in the future.

4. Debts

Any debt that you are carrying will need to be paid off in full. This also includes interest on loans, credit cards, mortgages, cars, and anything else with a balance. Your debt amount should be included so that your accounts can be cleared with the payout.

Add funeral and burial expenses as well as medical debt. Estimate costs, such as hospital stays, hospice, or any other end of life care, that will incur debt after you are gone.

When you are ready to select the right life insurance policy for your situation, contact Kelley Agency. Serving Lorain County and Cleveland, OH, since 1960, Dan Kelley ensures everyone receives the benefits of his extensive expertise in the insurance industry. Call (440) 282-8898 to schedule an appointment for your insurance needs.