You're ready to get a life insurance quote, but what do you do when it's time to select the policy amount? Do you go with the highest amount or lowest? Follow these steps to better estimate how much term life insurance might be right for you.
Step 1: Add up your "can't-live-without" contributions
People in your life probably depend on you financially, especially if you’re the breadwinner in the house. That means that without your paycheck, they would struggle to pay for everyday necessities like rent, food, and utilities. Look back over last month’s bank statements, your budget, or your checkbook to see what you paid for and how much it was. Narrow your focus by pulling out only the necessities—things your loved ones couldn’t live comfortably without.
TO DO: Tally up this amount and multiply it by the number of months you think it would take your loved ones to get back on their feet. Expenses might include food, gas, electricity, water, heating/cooling, childcare, and mortgage or rent.
Step 2: Consider your funeral service
Thinking about your own funeral service is a difficult subject to address, however, when it comes to taking care of you and your family, it’s important to consider what type of funeral service is right for you. The average funeral in America costs about $7,000 and $10,000, which typically includes the funeral home service, cemetery burial, and headstone installation, per Parting.com. You can keep these costs low by shopping around, choosing a direct burial (no embalming or visitation), picking a simple casket, and encouraging loved ones to hold your memorial service outside of the funeral home.
TO DO: Write down your funeral wishes and communicate them to loved ones. Call around to a few funeral homes in your area for estimates. On the other hand, you might choose cremation or burial at sea.
Step 3: Add up your debt
Do you have a car loan or any outstanding credit card debt? Any debt you leave behind can eat into the assets you had planned on leaving to your loved ones. Depending on how your loans and finances are set up, your family members could be responsible for paying off your debt.
When it comes to credit cards, for instance, any joint account holder could be responsible for the unpaid bills. Authorized users, on the other hand, would not be responsible for the outstanding balance. Life insurance can help make sure that debts are taken care of in the event of your passing.
TO DO: Take a good look at your current debt and who is on your accounts. Do you have co-signers? Joint account holders? Authorized users? Talk with them about how the debt would be handled in the event that something happened to you. If they can't handle the payments, you’ll want to factor the debt into your life insurance plans.
Step 4: Look towards the future
If your son or daughter has big dreams for their future, you can use life insurance to help make sure their plans become reality. A policy can help with the costs of test prep courses, school bills, or college tuition.
TO DO: Talk to your loved ones about the training programs they’d like to attend or the certifications they’d like to receive. Do research to get a rough estimate of how much it might cost.
Step 5: Get a quote & get insured
Add up the numbers from steps one through four. How much life insurance might you need? $15,000? $25,000? With this amount in mind, it’s time to get a life insurance quote! Go online, call 1-877-GO-DIRECT, or stop by a Direct Auto & Life Insurance location near you. Our friendly life insurance agents can help you get the coverage that’s best for your needs, all at a price you can afford.
How to Talk to Your Family About Term Life Insurance
Checklist for Applying for Term Life
*Policy terms and conditions apply. Individual term life insurance by Direct General Life Insurance Company, Nashville, TN. Policy 58TL02010713. Premium and other terms will vary by state, the insured's age, and the selected coverage.