Immediate expenses may include the total or partial payoff of installment loans, school loans, credit cards and other outstanding debts. You can also ease your worries by planning ahead for unexpected life events and financial expenses such as: medical/hospital expenses not covered by insurance, attorney's fees, probate costs, taxes and burial expenses. A quick "rule of thumb" is to estimate an amount needed for immediate expenses by multiplying your monthly income by five or six months.
Begin by listing your after-tax (net) monthly income.
Are you a homeowner? Chances are, you'll want to make sure that your family can keep their home. You may already have a policy for mortgage cancellation, but you should include the mortgage balance here because you will deduct existing life insurance in step 5.
Are you renting your home? You may want to think about providing a rent payment fund for several years. You might also want this amount to be sufficient for your surviving spouse to buy a home in the event of your death.
Think about providing a reasonable standard of living for your surviving spouse and family in the event of your death. We suggest you use your annual income multiplied by 5 to 10 years. If you have not taken care of all outstanding debts under the previous two categories, allow for repayment of any that remain in this calculation.
If you are married and both spouses are working, don't overlook the money that may be needed for child care!
Do you plan to help pay for your children's college education? Use any reasonable cost to calculate this expense. Annual costs often range from $7,000 to $25,000.
Next, subtract your present life insurance and other cash assets from the subtotal above. You can also subtract any assets that could be used to either pay off an existing obligation (e.g., sale of an auto to pay off the loan) or provide income (e.g., investments such as stocks, bonds, and any proceeds available from qualified retirement plans).
The best thing to do is fill out an online life-insurance quote form. We can recommend the coverage best suited to your needs and budget.
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