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How To Calculate The Coverage You Need

For most people, the purpose of term life insurance is "income replacement." That means you buy enough coverage to provide your family with the insurance proceeds to replace your annual income if something happened to you.

A simple rule of thumb many investment counselors advocate is to get a life policy worth ten times your annual income. But this quick method doesn't take into consideration your particular needs and assets or the current economic environment. For example, if investments have a return of about 5%, your heirs would need coverage at twenty times your annual income.

When calculating how much coverage you need, you'll want to consider:

  • Your current income.
  • How many years you'd want your heirs to receive income.
  • Whether you want the life insurance proceeds to cover college costs for your children. If yes, how many children do you have? How many years of college will each one need? And how expensive are the schools?
  • Are there other big expenses you want to cover?
  • Will your heirs have other sources of funds besides your life insurance proceeds?
  • Do you already have some life insurance?

A SelectQuote licensed agent can help you do a customized "Needs Analysis." This will give you a much better idea of just how much term life insurance you need – and for how long. Just call 1-800-670-3213.

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