How many terms of Life Insurance Should I Get for My Growing Family?
COVID-19 has made 24% of consumers more likely to discuss end-of-life planning with family, according to LIMRA’s 2022 Insurance Barometer Study.
And life insurance is a critical component of this planning to ensure financial protection for your family in the event of your passing.
Term life insurance lasts 10 to 30 years. If you pass away while the policy is in force, it protects your loved ones financially by paying them a death benefit. This death benefit can replace your income and help them pay off debts.
Term life insurance is inexpensive, but you will want to ensure you’re neither underpaying nor overpaying for coverage. So, examining
your life circumstances and goals is essential when determining your coverage needs. This article will dive into a few factors to consider so you can calculate your coverage needs before looking for term life insurance quotes.
How to determine how much term life coverage you need
Here are some considerations for determining the amount of term life insurance coverage you need for your family:
1 - The number of dependents you’ll have
Many people use life insurance to help their partner provide for their kids if the policyholder passes away. So, you should weigh the number of children you have and plan on having when calculating the coverage you need. Additionally, if you have children with special needs, you might consider increasing coverage to ensure they’re taken care of. You may also want to include your partner in that calculation if they aren’t employed.
Sometimes, you may have more dependents than your partner and kids. For example, you may have aging parents who need home care. Getting more coverage can help you pay for a caregiver if you pass away and your spouse cannot care for them.
2 - How long you’ll need coverage
Knowing how long you need coverage is vital to selecting a term life insurance policy. For example, if you plan on having multiple children — especially further apart — you may need a longer-term life insurance policy to ensure your children are covered.
Another consideration is how long you need to cover each child. For example, some parents may want a 30-year policy to protect their child well beyond college age. They might want to ensure their child finishes any post-secondary education or is in a stable career before the policy ends. On the other hand, some families may find that they only need a policy until their child becomes a self-sufficient adult.
3 - Your living expenses
If you keep expenses low and live in an area with a low cost of living, you can probably get less coverage than if you live somewhere with a high cost of living and have more lifestyle expenses.
The bottom line
To get a term life policy with the coverage you need for your growing family, start by looking at how many dependents you have. These will mainly be your children, but could also include your spouse or aging parents. From there, look at your living expenses to estimate the death benefit you need, then consider how long you need the coverage. Once you’ve thought these through, shop for multiple quotes matching these parameters to find the coverage you need at the best possible rate.