You know all those inspiring songs and speeches that encourage you to live like it’s your last day on Earth? Turns out that’s a good mindset for calculating how much life insurance you may need.
And, to make it easier, we created a life insurance needs estimator to walk you through the many factors to consider.
The fields in our Life Insurance Needs Estimator are listed by importance. So, as you fill it out, pay special attention to the first three fields: paying off your mortgage, replacing your income and final expenses. The other fields are good to consider but not a necessity.
1. Pay off your Mortgage
Keeping with the “if I die tomorrow” mentality, enter in the amount you owe on your mortgage right now. This eliminates a huge financial burden from your family.
What if I don’t own a house yet? Or, what if I’m planning to move?
If you’re planning on moving or buying your first home, you should still consider including a mortgage amount on the estimator. Since you don’t have an exact number for your mortgage, you will need to estimate it. Here are some ways to estimate an amount for your future mortgage:
Research the housing market and the cost of homes in the area you hope to live.
Consider your monthly household income and the amount you’re able to pay toward your mortgage.
Ask your bank how much they might finance you for, given your current income.
While you may not end up using that full mortgage amount to buy your future home, it’s better to be a little overinsured than underinsured. Those extra funds can still benefit your family in the other areas the estimator includes.
Should I include the mortgage of my second home?
Generally, no. The priority for your policy should be your primary residency.
Second homes aren’t usually considered a necessity. But, it’s your policy and if your second home is important, you can certainly include it.
Continue reading here at Auto-Owners Insurance.
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