Chicago, IL (PRWEB) March 04, 2014
YourLifeSolution.com, a website that instantly generates online life insurance quotes, is outlining three formulas to determine the amount of life insurance an individual should have, and if they are currently under-insured. These formulas are being published to help educate consumers to develop a broad but logical opinion on how much life insurance they should carry.
YourLifeSolution.com's Three Formulas for Calculating How Much Life Insurance a Person Should Have:
-YourLifeSolution.com states that the simplest and generally roughest estimate is to simply carry ten times one's own income in life insurance death benefit. "This definitely is not a foolproof method. It's almost just a shot in the dark for people who haven't fully realized life's liabilities yet such as a home, new car, children, and various other significant obligations", said Eric Smith, the founder and independent agent of YourLifeSolution.com.
-The second method is similar to the first but considered by many in the financial services industry to more accurate. It involves multiplying one's income by five fold and then adding in the cost of all outstanding debts. "This formula tends to be quite accurate for when someone has teenage children and still maintains a significant amount of debt. It allocates ample resources to keep a household financially sound for five years while clearing all household debts simultaneously", said Eric Smith.
-YourLifeSolution.com states that the third method is the most robust and foolproof. This is sometimes referred to as the 'capitalization method'. In this method a suitable death benefit is found by calculating an amount of income which is desired per year and then dividing by a conservative interest rate in order to calculate the total amount of capital necessary to make this perpetual income exist. "Say a family wants a perpetual income of $100,000 per year in the event the breadwinner in their home were to perish. In order to plan for this they would need approximately $2,000,000 worth of life insurance. This death benefit if invested conservatively can easily and consistently yield 5% interest. The family would simply have to set aside a small amount each year to offset inflation, but could easily maintain a near $100,000 per year standard-of-living thereafter", said Eric Smith
Readers looking for more information on term or permanent life insurance products are encouraged to visit YourLifeSolution.com, or call Eric Smith at 888.374.2764.