Calculating Life Insurance Coverage

We all need it but can we afford it… Life Insurance.
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**Scary** I know, but it’s something that needs to be put in everyone’s budget somehow. I was reading the Parent’s magazine a while ago and I saw this article on “How much coverage do you need?”(link not provided because I couldn’t find it online) I thought it was excellent and I really liked there calculation so I wanted to share. There is some information that you need to gather to figure this out, but it can be helpful to know how much you need. Don’t forget about the coverage you already have, and even go and ask your parents if they have a child’s policy for you when you were born.

A- Enter your family’s annual living expenses __________

B- Add the additional estimated annual expenses your family may incur if you’re not around (child care, independent health insurance etc)  ________________

C- Subtract your spouse’s earned social security death benefits (he should receive an annual statement around his birthday)________________

D- Multiply C  by the number of years until your youngest child will graduate from college ___________________

E- Multiply the number of kids you’ll be sending to college by $105,000(for public) or $275,000 (for private) ______________

F- Add D to E _________________

G- Add F to the one-time expenses you’d like to cover (funeral & estate-settlement costs) ____________________

H- Subtract from G The current value of individual life insurance you already have ___________________

This is roughly the amount of insurance you need. ____________________

The source article can be found in the February 2012 issue of the Parents magazine.

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