Calculate life insurance to protect your family?
How do you calculate the life insurance necessary to protect your family? According to Forbes magazine, most people buy life insurance with the purpose of covering final expenses, as a supplement to income during retirement, to transfer money to family members, to finish paying the mortgage, and as a replacement for the income that the family would lose if the insured dies.
However, many do not know what is the minimum amount necessary to guarantee the well-being of the family. But, as incredible as it may sound, there is a formula to calculate the amount of life insurance that someone might need.
Do not think that it is a complicated equation with multiple derivatives and multiplications. None of that, it is something very basic.
The formula is as follows: The minimum life insurance necessary is equal to the financial obligations that the insured intends to cover, minus the assets owned by him, which are easily convertible into cash.
An example of financial obligations is the replacement of income contributed by the deceased insured, which is calculated by multiplying the salary to be replaced by the number of years to be covered.
In other words, if the insured person earns $ 75,000 annually and wishes to cover the 10 years after his death, the financial obligation to be covered would be $ 750,000. You could also add the amount left to pay on a mortgage and the cost of educating the children.
The now would be called to subtract the existing assets that are easily convertible into constant and sound money. Such as savings, 401k plans, or stocks. The result would be the minimum amount of life insurance that you must buy to leave your family well protected, in case you are missing. How do I calculate the life insurance necessary to protect my family?
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