How Much Life Insurance Should Parents Have?
Parents go out of their way to ensure that their children are provided for in everyday life. Food, clothing, shelter, warmth and love are the essentials that every child gets from their parents in order to enjoy a happy and healthy childhood. While most parents would go out of their way to provide their children with whatever they need, there may come a time when that is no longer possible. Although some individuals avoid this thought entirely, it is important to address it in order to ensure that your children are always taken care of. If you are unsure about what amount you need to provide with a life insurance policy, consider all of the following points.
Consider Monthly Expenses of the Family:
This step is arguably the most important when determining how much to invest in a life insurance policy. Tally up the monthly expenses of the family in the same way that you might while organizing your budget. Most people will remember key points like rent or mortgage, food and school bills. However, there may also be additional costs depending on your personal situation. Keep in mind that perks of employment such as health or auto insurance may disappear if a working parent should pass away. These kinds of costs should then also be factored into the equation.
Determine the Current Salary of Working Parents
Another way to think about how much you need in life insurance in the event of an accident is to simply replace the salary of the working parent. If a father makes an average of fifty-thousand dollars per year, that may be the exact amount you need to secure your family for a year or longer as you stabilize your family after devastation. Many life insurance companies recommend that you seek out a policy that multiplies your yearly salary by the years until your children turn eighteen. If you have a ten year old child and make thirty-thousand dollars per year, for example, you would want to take out a policy for three hundred thousand dollars.
Provide for a Stay at Home Parent
It would be a mistake to overlook the work and value of a stay at home parent. Although they are not actively bringing in a source of income, many stay at home parents work longer hours than a working parent. In the event that a stay at home parent passes away, there will be a significant increase in household costs. You might need to pay for babysitters, nannying services or another form of childcare. If you plan to take out a policy for a stay at home parent, consider how much these new expenses would be when deciding on a specific amount.
Health, Location and Job Security:
These factors are all important when it comes to determining the size of your life insurance policy. Those in poor health may feel that a larger policy amount is vital, regardless of the monthly premiums. If you live in a location surrounded by family members, you might opt for a smaller amount and choose to rely on family in the case of an emergency. Job security will also play a role, as you may need to take out a larger policy to protect against the chance of your spouse losing his or her source of income as well.
By considering all this information, it is possible for parents to create a specific life insurance policy amount that will protect their children in any event or accident.
Clayton Lawrence is a personal finance expert and freelance writer for Whole term life insurance quotes.org, which he recommends for getting free life insurance quotes.