Here’s a quick rundown:
- The amount of coverage is one of the most important calculations.
- This can depend on your income, family size and total financial picture.
- Premiums are based on the type of policy and your age, overall health and other risks.
- The goal is to get a policy that aligns with both your needs and budget.
We asked Steve Heinonen, a Farmers Insurance® agent in Long Lake, Minnesota, to explain the math behind life insurance coverage and rates.
The first number customers usually want to look at is the amount of coverage. This is the biggest question for most customers. How much do I need? Calculating an exact figure can be like trying to predict the future. When I meet with customers, our goal is for the customer to arrive at a sound estimate that they’re comfortable with.
A good place to start is often seven to 10 times your annual income. That gives you a ballpark figure for helping your family replace that income. Then you should consider how many children you have, debts and assets, home equity and retirement savings. You also should look at major expenses your family might incur in the future, especially college. I discuss all of these things with customers to help them in their decision making.
The other big number is cost. The premium has to fit your budget. Your age and general health can affect your premium, as well as the type of policy you select. You have a lot of options when it comes to life insurance. The key is selecting a policy that aligns with your coverage needs at a price that you can afford. I give customers the information to help them make that selection.
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