There are various life insurance policies available to meet different coverage needs. To determine the appropriate amount of coverage, MoneySourceDeals's life insurance calculator can be used.
Our calculator takes into account various factors that affect the level of life insurance coverage you may require. We will guide you through the process of using our calculator and finding the best life insurance rates for your situation.
Although a calculator can assist in estimating life insurance levels and costs, it is recommended to consult with a licensed agent or financial planner to ensure that your coverage level is appropriate for your needs.
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Using our life insurance calculator
To determine your life insurance coverage level using our tool, simply complete the necessary fields above.
These fields include estimated burial expenses, the number of income-earning years you wish to replace for your beneficiary, the net income of your survivors, the value of your current investments and savings, the number of children your survivor will need to support, and whether you want to account for funding any one-time expenses for your survivors, such as college expenses or a gift to charity.
Please note that this is a death benefit calculator, which means that you are estimating the amount of life insurance you need to purchase. This tool is not designed to calculate life insurance premiums or show you how much life insurance will cost for you.
While you may be able to find a life insurance cost calculator, it is recommended that you obtain a life insurance quote from a company that meets your needs. Only an actual quote will give you an accurate idea of how much your life insurance will cost.
What is the appropriate amount of life insurance coverage for me?
To determine the appropriate amount of life insurance, consider the following steps:
- Determine the reason for purchasing coverage: To determine the appropriate amount of life insurance to purchase, it is important to first understand the purpose of life insurance. The reason for obtaining coverage, whether it is to assist a loved one in paying off a debt, to replace lost income, or to provide a financial gift, will heavily influence the amount of coverage needed.
- Decide on the type of policy you want. There are various types of life insurance policies, each with its own unique features. Understanding the type of policy you require can assist you in determining the amount of coverage you need.
- Review your annual salary. If you are using life insurance to replace your income for a loved one, multiply your annual income by the number of years until retirement. This way, if you pass away, your loved one will receive a death benefit equal to the amount of money you would have contributed to the household.
- If you are considering using life insurance to pay off a debt, you may only need coverage equal to the principal amount of that debt. Alternatively, you may choose to leave a financial gift for your beneficiaries, in which case the coverage amount is up to you.
- Consider leaving a financial gift by using your life insurance policy. The amount of the gift is up to you and can be designated for a charity or to pay for a child's college expenses. The amount of the gift is up to you and can be designated for a charity or to pay for a child's college expenses.
- Assess your assets. If you have significant assets, such as a large amount of savings or investment funds, you may not require as much life insurance as someone with less wealth.
- If you are uncertain about how much life insurance to purchase, consider working with an agent or certified financial planner. These professionals can assist you in evaluating your situation and determining the appropriate type and level of coverage.
How to get the best life insurance rates
To calculate life insurance premiums, obtain and compare quotes from different carriers. Although each company calculates rates differently, quotes for the same coverage types and levels should be fairly similar.
Understanding the factors that affect life insurance rates can also help lower the price.
- Your policy type and limits: The cost of your policy is determined by the amount of insurance you purchase. For instance, a policy with a death benefit of $3 million will cost more than one with a payout of $500,000. Additionally, the type of policy you choose will also affect the cost. Generally, term policies are more affordable than permanent insurance.
- Your age affects your life insurance rates as it is used to calculate the risk of the insurance company paying your death benefit. The older you are, the higher your rates will likely be.
- Your health is a rating factor that you can partially control. If you are generally healthy, you will likely receive a cheaper life insurance premium. However, if you have chronic health issues, you may want to consider policies that can be issued without a medical exam. Keep in mind that policies that don't require medical exams may be more expensive to account for the risk.
- Certain occupations: Such as law enforcement officers, firefighters, and active military members, may result in higher insurance rates due to the increased risk to personal safety.
- Hobbies and Life Insurance: Risky hobbies can result in higher life insurance rates or even denial of coverage. For instance, if you are a skydiver, some carriers may not provide coverage if you answer affirmatively to this question on your application.
- Habits that increase your risk for health complications or death, such as smoking or drug use, may result in higher premiums or even exclusion from coverage.
Frequently asked questions
What is the formula for calculating life insurance?
Calculating the amount of life insurance you need is unique to your circumstances, and there is no exact formula to follow. A good starting point is to multiply your salary by the number of years left until retirement.
However, this method does not account for any debts you may want to cover with your death benefit, nor does it consider any charitable donations or one-time expenses, such as college tuition for a child.
What is the ideal duration for life insurance coverage?
The length of coverage you need depends on your specific situation. If you are purchasing coverage solely to provide financial protection for a loved one in the event of your death before a debt is paid off, then you may only require coverage for the duration of that debt.
For instance, if you are covering your contribution to a mortgage payment, a 15- or 30-year term life insurance policy may be suitable, depending on the length of your mortgage.
If you want to leave a financial gift for your children regardless of the circumstances, you may choose permanent life insurance. This type of insurance lasts until your death, as long as the premiums are paid, and does not have a term period.
Which life insurance company offers the lowest rates?
While there is no single company that is always the cheapest for everyone, it is still important to compare a couple of quotes for reference. Life insurance prices vary depending on coverage type, limits, and personal rating factors.
Although life insurance quotes do not vary as much as home or auto insurance, it is always better to be well-informed. Note that life insurance discounts cannot be offered by insurers due to legal restrictions.
Therefore, the only ways to obtain cheaper coverage are to decrease your coverage amount or enhance your personal rating factors prior to submitting your application.