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BY ALY YALE
GETTY IMAGES/ISTOCKPHOTO
There are many factors to consider when trying to determine the right term life insurance figure.
Term life insurance is a type of temporary life insurance that covers you for a specific period — usually between 10 and 30 years. If you pass away during the coverage period, your beneficiaries receive a payout from the policy, which they can use to cover funeral expenses, household bills, or any remaining debts you may leave behind (among other things).
Payouts for term life insurance policies vary, but most companies offer options well into the millions. To determine the term life insurance amount you should purchase, you'll want to think about many factors.
You can start by getting a free online price estimate now so you know exactly what to expect.
Here are four questions that will help you better determine how much term life insurance you may need.
If you're single, you may only want enough coverage to pay for your funeral, burial, and any outstanding debts you leave behind so your loved ones don't have to foot the bill themselves.
If you have dependents, however, like kids or a spouse, you'll probably want extra coverage, particularly if you contribute income to the household. Many experts say to multiply your annual income times 10 and then add in $100,000 per child for possible college education costs.
If your spouse is a stay-at-home parent or otherwise doesn't work outside the home, you'll want to increase your payout even more. Should you pass, they may need to return to work, and their at-home duties would need to be replaced by another provider, like a nanny, housekeeper, or someone else. Make sure your policy has enough coverage to account for these extra costs in your absence.
You can get a free online price quote here now to see how much a policy could cost.
How much debt do you have?
You don't want to leave your loved ones saddled with debts they can't repay. To ensure your policy will pay out enough to cover them, add up the balances on any mortgages, credit cards, student loans, and any other loans you have in your name. You should also include the debts your spouse or others in your household may have, as these will need to be paid off eventually, too.
Then, add all your other needs — funeral, burial, salary replacement, and possible home services — and that's about how many terms life insurance coverage you'll want to aim for.
If you have assets that you'll leave for your heirs — liquid ones like savings accounts or college funds, for example — you can subtract those from the number you got above.
Keep in mind, though: Circumstances can change quickly, so having an extra buffer never hurts. You may have medical bills or other end-of-life expenses you can't plan for.
There's no set amount or hard-and-fast formula for determining how much term life insurance coverage you need. You also may want to consider other life insurance types, like whole life insurance, variable life insurance, or universal life insurance, depending on your circumstances.
If you're not sure what type of life insurance to choose or how much coverage to get, consider speaking to an independent insurance agent. They can help you shop around for your policy, compare insurance companies, and get the best coverage for your budget and needs.
