Term Life Insurance: Calculating Your Future Costs
Among your most important life insurance questions, you want to know how much it's going to cost. A good rough way to determine term life insurance needs is to use a life insurance calculator. These tools are available online and are useful in a pinch. Keep in mind that the most accurate estimates are only available directly from the source. If you want to know exactly what kind of price you'll pay for a life insurance policy, it's best to speak to various insurers and collect multiple quotes. Before you jump into the shopping process, learn the two variables that determine your term life insurance needs.
What beneficiaries will need immediately after the death of the insured
This cost is the more straightforward amount of the two. This sum is a combination of any expenses incurred immediately by the death of the insured, such as funeral costs, final estate-settlement costs and remaining medical bills.
How much money beneficiaries will need in the long run
This second factor is trickier to predict and requires a determination of the present value of future needed capital. For example, if you're looking to purchase a life insurance policy on yourself to protect your family's finances after your death, you want to make sure that they get enough money to sustain their household for years to come.
This amount is calculated using a variety of factors, including:
- Outstanding debts and mortgage
- College funding needs for children
- Your family's current annual income needs
- How many years;' worth of income your family would need after your death
- Your current savings, retirement accounts and investments
- Your spouse's current annual income, predicted number of years of employment after your death and his or her marginal tax rate
When calculating your term life insurance needs, remember that your beneficiaries might also receive Social Security benefits. This money will somewhat reduce your insurance needs and thus, also the cost of a life insurance policy.
A licensed agent is a human life insurance calculator. A professional also will deliver more accurate results than an online tool. Use a life insurance calculator only to gain a rough estimate. Remember that you shouldn't sacrifice quality in a policy for cheap life insurance. The security of your loved ones far outweighs saving a few bucks on a less expensive policy. However, forgoing cheap life insurance doesn't mean you can't find an affordable policy. Speak to an agent to learn more.