Do you really need 10x your salary in life insurance?

If you have spent time looking at the information on choosing the right amount of life insurance, you find a fairly standard answers, but also a lot of ambiguity . Indeed, the amount of life insurance a person needs varies from case to case. Yet, as with other types of financial management, industry experts have weighed on what they feel is best for the average consumer.

One of the basic rules is to take the life insurance coverage equal to five to 10 times your salary. For many of us, it sounds like a lot of money. It is only when you get into the details of how people use money over time that you realize that five to 10 times the salary can actually be a pretty conservative estimate.

Here are some considerations that you'll want to think about and consider :.

When you get into the details ... you realize that five to 10 times the salary can actually be a pretty conservative estimate

1. wage replacement home. One of the most fundamental ideas about life insurance is that you have enough to last a number of years, when your salary will not come. This involves calculating "time in retirement" of a person and how much money they are projected to win in five, 10, 15, next 20 years or more.

Another way to this is that you can try to understand how the household will have to deal with in terms of expenditure each year, and multiply that by the number of years you'll need coverage for. This is a fairly simple way to make calculations life insurance.

to have a working idea of ​​your life insurance needs based on a few simple inputs, try using this easy life insurance needs calculator.

2. Living on interest There is another interesting idea that many experts have put there. the idea that, with great performance death enough (what the policy pays), a family would be able to live on the interest a long time.

Take a death benefit of an even $ 1 million. Using a very simple calculation, you will see that at an interest rate of 5%, that $ 1 million would generate $ 50,000 per year. Then take a look at your stock opportunities, trust funds and existing investment funds, and see if you can get something close to 5%.

After adjusting to market conditions, you can understand how your household could achieve capital gains on a product of life insurance policy that is about even with the projected wage.

3. Age of dependents. Another major problem is the age of dependents in your household. For example, if your two children aged 15 and 17, you may only want a few years of coverage. On the other hand, parents with new babies and toddlers want policies that provide for a much longer time.

All of this is to suggest that when it comes to life insurance, you may need more than you think you do. Additionally, with the low cost of premiums for most life insurance policies, it makes sense to get an amount that will really pay if necessary. After all, that is exactly what it is insurance.

If you are unsure, talk with a qualified insurance agent or counselor to learn how to get the coverage you need at prices you can afford. And the cat will not cost you a dime.