The face value on life insurance policies vary from person to person.  There are essentially two factors that come into play when purchasing life insurance. The first is the amount of money it would it take for a family to maintain the standard of living to which they currently have and how much a family can afford to pay for insurance premiums each month.

A life insurance policy should depend on the amount of money a family will need to maintain the same standard of living. This means that there is a certain monthly or yearly income needed to pay for minor and major expenses such a mortgage, cars and education. Life insurance needs alter with each situation.If there are young children in the home, it is safe to assume that they will need funds to support them until they are able to pay their own way.  The approximate costs of college education must be calculated and added to their other overall expenses, such as for clothing, food, shelter and other necessities must.Additionally, outstanding debts, such as mortgage and car loans must be included.  Finally, calculate any additional expenses needed to maintain the same standard of life.

You can confer with a financial advisor to help them construct a viable estate plan to ensure stability for their beneficiaries.Even during this time when the markets are unpredictable, a financial advisor can help their client put their money in the investments that will give reasonable returns on their investments each year.  An acceptable rule of thumb is to approximate the income taxes on investment returns at 35% to predict yearly income. Divide the yearly income by twelve to arrive at an average monthly income.  For example, if a family has $8,000 in expenses per month, they will need approximately $3,000,000 in coverage.

This is likely a conservative amount of life insurance as $3,000,000 earning 5% interest yearly equates to $150,000 in annual income.After taxes, the yearly income would be around ,000 or ,000 per month.

One should only consider an amount of life insurance cover that requires an annual premium that is affordable.  Consumers must be prudent when purchasing a life insurance cover policy.  It is essential that they know their limits, because purchasing a policy and having it cancelled because they cannot afford the payments will result in a loss of the premiums invested and their beneficiaries will receive no death benefit.

It is relatively easy for consumers to find that happy medium where they are comfortable with the cost of the premiums and the amount of coverage it provides to sustain the same standard of living for their families.

Please note that this article is informational and not to be considered professional advice.

Tagged with: • • •

Filed under: Insurance

Like this post? Subscribe to my RSS feed and get loads more!