Friday, March 26, 2010

How much insurance do I need?

Popular approach in the purchase of insurance is based on income replacement. In this approach, there is a formula, between five or ten times your annual salary is often used to calculate how much coverage you need. Another approach is to buy insurance based on individual needs and preferences. The first step is to determine the unique income replacement needs.

Currently, the majority of your income tax ran into the sector (insurance benefits are generally income tax free) and especially to your own lifestyle. Begin by determining your net income after tax. Then add all your personal expenses such as food, clothing, magazine subscriptions, club memberships, transportation expenses, etc.. The remainder represents annual income of your insurance.

You'll want a death benefit amount which, when invested, will provide income annually to cover this amount. Then, you have to add that the amount of funds needed for one-time expenses such as college tuition for your kids or pay the mortgage or other debt.

Income replacement nonworking spouse is important and often overlooked in the care of problems related to insurance. Coverage must provide your costs for child care, housekeeping, or maintenance. Add to this any net income from part-time job.

Finally, estimate your own "final expenses" such as land taxes, medical expenses covered by insurance, and funeral expenses.

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