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Insurance

How Much Life Insurance Do I Need?

The answer to this question may help you successfully plan for the future. Our life insurance needs calculator  lets you estimate how much life insurance you need in addition to the amount you may already own. Consider:

  • How much will your loved ones need to meet financial obligations after you are gone?
  • How much future income is needed for those you leave behind?

Life Insurance Calculator

 

When determining a sufficient amount of insurance and life insurance coverage type, some individuals use the "multiple of earnings" method. Here's an example: someone earning $40,000 per year could evaluate that they should have insurance equivalent to eight times her salary equaling $320,000. This is a simple method but it has shortcomings if you use a multiple that's too low. See the multiple of earnings method below.

 

Another way to determine life insurance coverage amounts is called "Human Life Value." This is the method that is often used in courts to award judgments in wrongful death lawsuits. While Human Life Value can be more complex to calculate than "multiple of earnings," it is considered a more accurate estimate of the amount of money you should have to replace future earnings – your human life value.

 

Human Life Value: An Example

Three ways to do this:

1. Use an interest rate and calculate. We’ll explain

2. Use a simple multiple of earnings – easiest and fairly accurate

3. Go through the full exercise

4. Go to a full human life value calculator

 

1. Use an interest rate.
Here’s what you do. First, estimate an interest rate that your family could earn with little or no risk. Let’s use 5% for the example. Then take your income and divide it by the interest rate. Example: Income of $100,000 divided by 5% = $2,000,000 human life value. Let’s prove it out: $2,000,000 x 5% interest = $100,000, a full replacement of income (not including inflation).

 

2. Multiple of Earnings
A simpler way might be to verify your Human Life Value by applying the simple underwriting guidelines like the ones that life insurance companies frequently use to suggest proper amounts of coverage. Here is a common guideline:

 

Your Age

Life Insurance Coverage
(Multiply the number below times your annual income to get your coverage)

25

25 times annual income

35

20 times annual income

45

15 times annual income

55

10 times annual income

 

Based on the example above, if you made $100,000 and you’re age 35 the insurance amount calculated would be $2,000,000 (20 times salary). This supports results obtained in the Human Life Value calculation.

 

3. The full exercise
Get ready, this is a little complex. To just see the bottom line, go to sections one and two above. Human Life Value is defined as the present value (the value today) of future income that you could expected to earn in your lifetime.

Example: Sally is age 35 and she plans to retire at age 65. She currently earns a salary of $50,000 per year. She also runs the house and it would cost an additional $15,000 per year to replace that work with a housekeeper. Sally's total value to her family at age 35 is determined through the following life insurance calculator example:

 

80% of her $50,000 salary $40,000

Non-wage value $15,000

Her total value at age 35 $55,000

Next you could also get more technical and adjust this $55,000 for inflation over the next 30 years, until she plans to retire. At a 3% rate of annual growth, her value would increase to $99,336 by age 55. Let’s just make it simple and look below:

 

4. Use a calculator
Here’s one that we like:
Life Insurance Calculator

If you want further help or are still asking the question "how much life insurance do I need?", you can contact us by email or call us at 1-877-475-5152.   Find out more about types of life insurance or how to get an instant quote online.

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If I can’t pay my life Insurance premium, what should I do?

If unexpected expenses come up and you can’t pay your life insurance premium, you should know the possible consequences. The effect depends on the type of policy and coverage you have and the policy terms and conditions.

Term: If you stop paying premiums, your coverage lapses.

Permanent: If you have this type of policy, you will have the following choices:

  • Cash out the policy.
    This means that you can stop paying the premium and collect the available cash savings. You will no longer be covered by life insurance, but you will at least save some of the proceeds of the policy. You may, however, have to pay taxes on some of the cash value if the sum exceeds what you have paid in premiums.
  • Non-forfeiture options
    There may be a “reduced paid-up” option. This means that you can stop paying premiums completely in return for a reduced death benefit and no cash saving. You may also be able to convert the permanent policy to an extended term policy for a time period based on the accumulated cash savings in the policy.
  • Policy will lapse
    If this happens, see if the policy can be reinstated. Some insurers may allow this if you do it within five years of lapsing. You will most likely have to pass a physical examination for the reinstated policy and pay back the premiums you would have paid plus interest. Annual premiums for the reinstated policy may be lower than those for a new, comparable policy.

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How can I request a quote from a representative?

Request a Quote

Have additional questions about life insurance or our products unsderwritten by Industrial Alliance? Please Use this page to submit a request for more information or a quote. A Precision Insurance representative will respond to your request.

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Additional comments or questions:

The information on this website does not constitute your official policy documents. All information on this website is provided for reference only. Policy wording, definitions, translations, product details coverage limits and plan details are subject to change at any time, without notice prior to a purchase and delivery of the policy.

The purchase of a policy confirms acceptance of the policy wording, terms, conditions, limits and exclusions set out therein. Ingle International and its affiliates are not responsible for differences between the information found on this site and the actual coverage provided.

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How often should I review my policy?

You should review all of your insurance needs at least once a year. If you have a major life change, you should contact your insurance agent or company representative. The change in your life may have a significant impact on your insurance needs. Life changes may include:

  • Marriage or divorce
  • A child or grandchild who is born or adopted
  • Significant changes in your health or that of your spouse/domestic partner
  • Taking on the financial responsibility of an aging parent
  • Purchasing a new home
  • A loved one who requires long-term care
  • Refinancing your home
  • Coming into an inheritance

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How do I file a life insurance claim?

To begin the claims process:

Get several copies of the death certificate.

Call Precision Insurance Services, 1-877-475-5152. We can help you fill out the necessary forms and act as an intermediary with the insurance company. (Don’t keep life insurance policies in your safe deposit box. In most states, safe deposit boxes are sealed temporarily upon the death of the owner, which can delay the settlement. ) If you don’t have an insurance agent, or don’t know who the deceased's agent was, contact the company directly.

Submit a certified copy of the death certificate from the funeral director with the policy claim. Once the claim is submitted, a settlement should be issued to you shortly. Once a life insurance claim is submitted, you must determine how the proceeds will be distributed. These are some of the options available:

  • Lump sum -- You receive the entire death benefit in a single amount.
  • Specific income provision -- The company pays you both principal and interest on a predetermined schedule.
  • Life income option -- You receive a guaranteed income for life. The amount of income depends on the death benefit, your gender and your age at the time of the insured's death.
  • Interest income option -- The company holds the proceeds and pays you interest on them. The death benefit remains intact and goes to a secondary beneficiary upon your death.

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