How Much Life Insurance Do You Need?

How to Calculate Your Life Insurance Needs
It’s hard to generalize when it comes to life insurance. What one family needs may differ drastically from what another family in similar circumstances requires.

How can you know if you have enough?

One way to determine how much life insurance you need is to peg it to 10 times your yearly income. This method, however, doesn’t provide much guidance to people who are not employed, such as stay-at-home parents.

If the spouse at home dies, the survivor may need life insurance funds to pay for the child care and home maintenance costs that had previously been provided free of charge.

A better way to come up with your specific number is to figure out exactly how much money your family will need at the time of your death.

Start with your family’s debt, which includes mortgages, auto loans, student loans, and credit-card debt. Determine your future cash needs – the monthly amount needed to sustain the household – as well as any major future expenses, such as tuition, new cars, medical bills, and estate-settlement costs.

Add these together, then subtract your current liquid assets – whatever your family currently has in savings, such as amounts in bank and brokerage accounts and tuition savings plans.

As an example, say you are married with two children (for example, ages 8 and 6) and earn $50,000 a year. If you were to die now, you’d want to support your spouse for 15 years, until your youngest child is out of college. To do this, you’ll need $750,000 in income replacement ($50,000 for 15 years), $200,000 for two college educations, and $5,000 for funeral costs.

But you also may want to pay off the $100,000 you owe on your mortgage, the $10,000 in car loans and the $5,000 in credit card debt. That takes your total to $1,070 million. From that total, subtract what you’ve saved, and that’s how much you will need in life insurance.


Travel Insurance Is Crucial for Those 50+
In today’s uncertain world, a health travel insurance policy makes more sense than ever. But if you’re over 50, you definitely need to consider purchasing it before setting out abroad or on a cruise. Injuries and illnesses arise during travel, and ensuring you have the proper medical coverage to meet your needs is crucial.

New situations, different terrain, and riskier activities, such as parasailing or hiking excursions, can contribute to injuries, particular for older travelers. Even driving in a strange country can be a problem for many.

According to the Centers for Disease Control and Prevention, motor vehicle crashes are the top cause of death of U.S. citizens abroad.

Medicare and Medigap

If you have Medicare, your coverage applies in the U.S. wherever practitioners accept it. But if you have a Medicare or Medigap supplement, check with your supplemental insurer on overseas coverage. The website offers travel coverage advice, and warns that Medigap policies have a lifetime travel emergency coverage limit of $50,000.

Evacuation and repatriation coverage

The best way to ensure you have the broadest coverage overseas is with a travel insurance policy. For example, travel insurance provides emergency evacuation and repatriation. If injured overseas, you (and your spouse) may want to return home for treatment and recuperation. This coverage goes beyond transporting you after an injury or illness. It includes advice, coordination of admission to a local facility, medical air transport and escort when needed, and ground transportation coordination at both ends of an evacuation; it also smooths immigration and flight clearances and assists with travel arrangements.

While some travel policies cover both medical and repatriation, you still may require two policies. Also, although some insurers offer coverage for a single trip, if you make frequent trips in the same year, an annual plan may be the best choice for you. Snowbirds in particular may benefit from this type of plan.