How Much Life Insurance Do You Need? Determine The Amount Here
Buying life insurance is a must, particularly if your family depends on your income
. Life insurance ensures that a family is financially protected and stable after the demise of the policy holder. Once you decide to buy a life insurance policy, the next step is to determine the exact amount that your family will require if you are not around. However, there is no possible way to calculate the amount to the last paisa, but you can certainly take a guesstimate.
Life Insurance Guesstimate
There are various ways of doing this but most financial calculations are based on complicated financial formula that people like you and I usually manage to get it wrong. The following table has been developed by financial experts to help you determine the approximate amount of life insurance you need.
Age (In years)-------------------------------------Multiples of Annual Income
20 29 ___________________________20 times
30 39 ___________________________15 times
40 55 ___________________________10 times
55 and above ___________________________5 times
Life Insurance Guesstimate Explained
When you are younger or have a younger family, you have more financial dependents and more responsibilities. As you grow older, your liabilities and the need for insurance go down. It also becomes difficult to get insurance with passing age. That is why you need to insure your life for a bigger amount when you are young. Since your annual income will presumably rise as you grow older, your insurability does not really decrease too much, only the multiplying factor does.
This method of calculating required life insurance works because:
It is a simplified method for people who do not have a background in finance
It is a handy tool - very effective if you want a quick figure offhand.
You dont need to visit life insurance websites that ask more questions than they answer.
This calculation will give you a figure which is very close to the one that you need.