How much life insurance do I need calculator. The calculator adds the responsibilities (e.g. mortgage loan+ car loan + future goals) with times the number of years that you desire to substitute your annual income and subtracts your volatile assets (e.g. pension money + bank balance + current insurance) from it to calculate the coverage.
Life insurance, things you need to know
Life is a blessing and so is the family. Yet no one can deny the decree of fate. When the death angel calls, you have to answer it immediately, no matter you have younger kids or old parents completely relying upon you.
Emotional losses can be overcome one day but the financial needs are always there to put your loving ones in trouble when you are no longer alive to support them.
Yet if you wonder that why it is a must buy a thing for a supporter of a family, you have to go in details of life insurance to better know that what is life insurance?
Life insurance is a legal agreement between an applicant and the insurance company. This agreement is further represented by an insurance policy that includes all the details of proceedings.
According to this policy, the policyholder is obliged to pay the specific amount as a policy premium, and if the policyholder dies the insurance company is bound to pay the guaranteed payout to the beneficiary of the policyholder.
How does life insurance work?
Proceedings of life insurance depend upon the type of insurance policy that one has bought. If you want to know further details that how does life insurance work, the various factors have been discussed here.
Permanent life insurance covers the whole life of policyholders and offers an investment account along with the death benefit.
Term life insurance policy remains in force for a pre-determined term and then needs to be renewed, converted, or terminated as per the desire of the policyholder. It offers low premiums and no investment account.
It depends upon your budget and will that either you want to buy permanent insurance or term life insurance. The difference between these two is the duration of activity and the investment account.
Both types of policies differ from each other in certain ways:
|Term insurance||Permanent insurance|
|Cash value plan|
|Conversion of policy|
|Expiry||After a term|
|Variation in death benefit|
|Claim for death benefit|
A general overview of the working of both type of policies is given below:
After choice of policy, the next step is the choice of a suitable beneficiary/beneficiaries. A contingent beneficiary is also required.
Premiums are decided to pay either monthly or annually according to the policy plan or policyholder’s choice.
Sometimes premiums are paid in advance in a lump-sum amount.
In the case of permanent life insurance, premiums are split into two parts, one is the cost of insurance and the other goes to an investment account known as a cash-value account.
Term life insurance offers no cash value and just pays a death benefit if the policyholder dies within the term of the policy.
After the death of the policyholder, the beneficiary makes a claim for the death benefit and after necessary documentation, the insurance policy pays the face value.
Permanent life insurance offers high premiums and premiums are split into two parts, one is the cost of insurance, and the other goes to an investment account. Term insurance has low premiums and no cash value.
Is life insurance worth it?
Most of the people while buying a policy or even thinking to buy a life insurance policy ask is life insurance worth it? Yes, it is worth it if:
You have younger kids who are unable to make their living and will require financial assistance for many years
You have old parents who are dependent upon you
You have handicapped children who will always be relying upon your financial support
You have a spouse who depends upon you and can’t survive without your help
You have to pay the mortgage loan, car loan, or estate taxes that you fear that your family will not be able to pay after your death
You are a student and you have to pay a student loan that will be an unbearable burden to your parents if u accidentally die before paying it
You have unmarried children who you know will need your help to make their marriage possible
All these situations make it clear that life insurance is actually worth it for the future security of your loved ones. It will provide them a face value to cover their household expenses, medical bills, academic expenses, and various miscellaneous needs.
Is life insurance tax deductible?
In the age of dearness, when everything is taxable, one may have a question while buying a policy that is life insurance taxable? If you are going to buy term life insurance, you don’t need to be worried. Term life insurance is not taxable even if you get the death benefit.
However, permanent life insurance is taxable in some situations. The situations can be:
- Employer paid premiums if exceed the coverage of $ 50,000 becomes taxable
- Interest money that is accumulated in the cash-value account is taxable when withdrawn
- Estate and inheritance taxes if you nominate in the policy “payable to my estate”
- If the death benefit is not immediately given to the beneficiary, instead it is kept by the company for a duration determined by the policyholder, then the money earned as interest is considered to be taxable
What type of deaths are covered by life insurance?
Do people often wonder what kind of deaths are covered by an insurance policy? Or they ask does life insurance cover suicide? Suicidal death is covered by some companies while there is no coverage for suicidal death in most of the insurance companies.
Here is a list of deaths that are covered by life insurance:
Death due to natural calamity such as flood, earthquake
Death because of some lethal morbidities e.g. cancer, heart failure
Now, there are the types of death that are not covered by life insurance:
Death due to poisoning or drug overdose
Homicidal death e.g. murder by the beneficiary
Death due to the involvement in some criminal activities
Yet there are some deaths that are controversial that means they are covered by some companies and not covered by the rest:
Death because of self-induced injury
Death due to STD e.g. AIDS
Best life insurance companies
Life insurance companies are present everywhere to provide you with the type of insurance policy according to your budget and desire. Here is the list of best life insurance companies that are working in U.S.A along with their current rating and average rates per month.
1. Life insurance companies in the U.S.A
|Company||Rating out of 5||per month||Headquarter|
|Northwestern mutual||4.6||Wisconsin, united states|
|Haven life||4.3||10.79||New York|
|State farm||4.2||15.3||Bloomington, united states|
|Banner life||4.1||8.69||Maryland, united states|
|Principal||4.0||8.78||Des Moines, lowa|
|Guardian life||3.9||10.01||New York|
|Mass mutual||3.9||10.22||Springfield, Massachusetts|
|New York life||3.8||10.75||New York|
|John Hancock||3.7||11.30||Boston, Massachusetts|
|Brighthouse financial||3.7||16.17||New York|
|Mutual of Omaha||3.6||11.84||Omaha, Nebraska|
|Prudential||3.6||15.52||Newark, New jersey|
|Policy genius||3.5||17.82||New York|
|Everyday life||3.5||Boston, Massachusetts|
|Fabric life insurance||3.5||16.67||Brooklyn|
|USAA||3.0||12.00||Fredericksburg Rd San Antonio|
|Ladder life||2.5||35.01||New York|
|Met Life||1.7||New York|
|American international group||14.02||New York|
2. Life insurance companies in the U.K
Here is a list of top life insurance companies in United Kingdom along with the type of insurance policy they are best in. Average rates per month range from $5 to $15, depending upon the type of policy, age, health, and hobbies of the policyholder.
|Royal London||Term life insurance and whole life||City of London|
|Liverpool Victoria||Level term, increasing term, decreasing term||Bournemouth|
|Beagle street||Level term, decreasing term||Peterborough|
|SunLife||No medical exam||Toronto|
|Post office||Term insurance||City of London|
|Zurich||Level, decreasing, increasing term, whole life||Wales|
|Scottish widows||Term life, whole life||Edinburg, Scotland|
|Friends life||Saint peter port, Guernsey|
|Direct line||Level term, decreasing term||The wharf, Neville street, Leads|
|Barclays||Level term, decreasing term||London|
|Halifax||Level term, increasing, decreasing term, whole life||The mound, Edinburg|
|Aviva||Level, increasing term, decreasing term||Gurugram, India|
|Nationwide||Level term, decreasing term||Swindon, U. K|
3. Life insurance companies in Australia
Best life insurance companies of Australia have been listed below, with the website address and the head office location of the company:
|Company||Ranking||Market share%||Head office||Company URL|
|TAL life limited||1st||24.20||Sydney, new south wales|
|AIA Australia limited||2nd||15.10||Melbourne|
|Zurich Australia limited||3rd||14.50||North Sydney|
|MLC limited||4th||11.60||North Sydney|
|MetLife insurance limited||8th||5.00||Sydney|
How much life insurance do I really need?
Life insurance is actually the cover of the needs of heirs after the death of a policyholder. So, if one is confused about the question that how much life insurance do I need, he should have a look at the following factors:
1. Family needs
If you have a family and want to provide them with financial support even after your death, you would have to look at the lifestyle of your family. The coverage of life insurance should be 10-15 times the annual expenses of your family.
If the annual expenses of your family are $50,000, you should buy a policy with the coverage of $500,000 at least to cover their financial needs until they establish themselves. With this huge money, they can make investments to earn a regular income.
2. Personal loans or debts
If you have to pay the mortgage loan, car loan, or some debit card charges, you have to add them to the previously calculated coverage.
If a person has to pay a $30,000 mortgage loan, $5000 car loan, and $2500 of bank loan, he will have to add the sum of all that is $37500 into the $500,000 previously calculated.
3. Future goals of family
If you have children that need financial support to meet their marriage expenses or academic expenses, this money will also be added to the coverage that is needed.
4. Funeral and burial expenses
If you feel that your family will not be able to spend on your funeral and burial, you must have a burial policy or add the amount needed for the funeral in the calculated death benefit.
5. Retirement years method
Another important method to calculate the death benefit by counting the remaining years in retirement and then multiplying them with your annual income.
If you are 45 years old, and the years left in retirement are 20. If you are making $50,000 in a year, you just need to multiply the amount of $50,000 with the years left in retirement e.g. 20 in this case. $100,000 will be the needed coverage.
Life insurance calculator
A calculator is used to calculate the death benefit needed by a policyholder. It calculates the coverage for a life insurance policy in the following two steps:
1. Calculation of requirements
Add all the expenses that your family will have to pay in the future in the times of years that you need to replace your income, such as:
times number of years you want to replace your annual income + (expenses for children marriage + academic expenses + mortgage loan + car loan + bank loan)
2. Subtracting the volatile assets
Volatile assets such as the current bank balance, property in hand, or the present life insurance. The resultant amount is the required coverage for life insurance.
What does Dave Ramsey say about insurance coverage?
Dave Ramsey is a voice of money in America. His words have great value in business words. If you want to know what Dave Ramsey says regarding coverage of life insurance, here is the straight forward and to the point answer.
He recommends having coverage that is 10-12 times the annual income of policyholders. The reason for this suggestion is that the death benefit is actually a replacement for the annual income of a policyholder.
When the policyholder dies, there is no annual or monthly income for his heirs. So, a huge amount of death benefit will be enough to cover several years of the policyholder’s family until they are able to earn their own living.
Calculator sums up the times the year that you need to replace your income with the required expenses. Volatile assets are subtracted from that amount.
Frequently asked questions
People frequently ask a number of questions related to the life insurance policy in order to satisfy themselves. Some of them have been answered below:
1. Is life insurance haram or halal?
One of the most asked questions is whether life insurance is religiously allowed to buy or not? So, there are controversies regarding life insurance to be halal or haram.
Typical insurance policies (term insurance or permanent insurance) contains the factor of excessive uncertainty in their contract
It can be considered as a kind of gambling because the future consequences are completely uncertain as happens in indexed life insurance
Interest that is an essential part of permanent life insurance is completely prohibited in Islam
Life insurance policies can be exploited such as higher premiums.
2. Is indexed universal life insurance beneficial?
Indexed life insurance is a kind of universal life insurance. In indexed life insurance, the saving portion is invested in the stock market or bond market.
The rise or fall of the cash value depends upon the performance of the index rate of the market. Sometimes the investment is also made in the mutual funds. So, if the market is going well, cash value increases, and vice versa.
3. What are the rates for 30-year term insurance?
Term insurance offers low premium rates as compared to permanent insurance. Average per month rates for 30-year term insurance is given as:
|Age||For females||For males|
|30||$ 21.85||$ 23.08|
|35||$ 24.18||$ 26.47|
|40||$ 35.78||$ 40.22|
|45||$ 47.53||$ 54.40|
4. What is a supplemental life insurance policy?
Supplemental life insurance is a type of insurance policy that can be acquired additionally along with the whole life insurance or term life insurance. Companies usually offer group term life insurance to their employees that are not sufficient.
So, there is an option to have supplemental life insurance that is also offered by the company at a very low cost or for free. It may involve burial coverage.
5. What are the disadvantages of permanent life insurance?
Permanent life insurance involves a lot of benefits for the policyholder and his beneficiary. Yet there are some disadvantages associated with it:
- Money is bound in the investment account and policyholder can’t invest in anywhere else
- It offers high premiums i.e. it’s costly
- It offers no flexibility as happens in term life insurance
- Cash value accumulation takes much time
- Cash value may shrink according to the progress of the stock or bond market
How much life insurance do I need calculator is a way to calculate the required coverage for a life insurance policy. The life insurance calculator calculates it in two steps.
First step is the summation of required expenses (such as family needs, future goals, mortgage or car loans) with times the number of years to replace the income of policyholders.
In the next step, the volatile assets (such as bank balance, current life insurance, or in hand property) are subtracted from the total coverage calculated previously.