The standard rules of thumb for purchasing life insurance policies – which tend to be based on income levels – may not be sufficient guidance in every case, according to a report in the Chicago Tribune.
Author and expert Tim Maurer told the Tribune that consumers should consider total life insurance needs by combining four main categories: Final expenses, mortgages and other debts, income replacement and educational funds. These will vary wildly depending on the number and age of a family’s children, amount of money owed on a mortgage and overall income level.
According to the Tribune, Maurer also warned that educational costs can be difficult to accurately calculate at the present time, given the highly changeable rate at which tuition’s and fees have climbed during the past several years. Erring on the side of caution might be advisable.
When purchasing life insurance, many forget inflation. If you are interested in a long term policy, this is a major area of consideration. Inflation costs in health care have also dramatically increased.
Consumers must also decide whether to purchase term-life or whole-life policies, because while both can provide the same overall coverage amount, they provide it for different amounts of time – and at different costs.
Once purchased, always review your life insurance needs which may include adding a spouse, children or purchasing a new home.