Most people believe they have enough life insurance coverage, according to a recent study.
The 2018 Insurance Barometer Study found that 76 percent of respondents believe they have enough life insurance, and only 19 percent think they need more. In the same study, 40 percent of people wish their spouse or partner would purchase more coverage.
Life insurance can help you protect the financial future of the people you love. That's why assessing your coverage needs isn't something you want to leave to guesswork. So how do you know how much coverage you need?
One way to figure your life insurance needs is to subtract your total liabilities from your total liquid assets. The difference will help you better predict what your future expenses and income needs may be in order to determine how much life insurance you should purchase.
Examples of liabilities include:
- Final expenses: Funeral/burial costs, outstanding medical bills
- Debt: Mortgage, consumer loans, unpaid taxes, student loans, credit cards
- Future income for your beneficiary(s): A special needs child, care for aging parents
- Education funding: Tuition, room and board, books, and lab fees
Example of assets and income include:
- Liquid money: Cash in a savings or checking account
- Money in retirement accounts: IRA, 401(k) plan
- Investments: Stocks, bonds
- Income from other sources: Social Security, pension, real estate, dividends
You also may want to consider any expenses that your spouse would incur if you weren't around such as laundry service, childcare or lawn service.
Protective Life also has a Life Insurance Needs Calculator, to help you more easily assess your life insurance needs. Once you're armed with this information, you can meet with a life insurance agent or company representative to help you find the right policy to fit your budget.