Term Life Insurance is the most boring and annoying “adulting” assignment ever. Everyone thinks that at the age of eighteen he or she becomes some kind of superhero immortal beings and doesn’t need any protection. I guess it is really true now. However, if you know the statistics, you will be way ahead of other people.
So, this formula can be seen as a shield for your parents or guardians. In case something happens and you are not here anymore, somebody will have to pay for your funeral. Right now, the average cost of funeral services in the US is approximately $8,000. This particular amount is the lowest one you need to estimate.
Then you need to consider your debts. In case you have co-signed any loans with your parents for your first car or college tuition, this debt will belong to your parents to pay back. So, this amount should be added to the previous one.
Finally, you need to think about the income you generate for your family. In case you help your parents pay for electricity bills and go shopping for food, you need to calculate how much you spend monthly on your family contributions. Now multiply this amount by 12 to get the annual amount. Then you multiply this amount by the years you are the main source of income for your family. Thus, you won’t be in financial trouble after your death.
All three amounts – funeral costs, total debts and income replacement – should be summed up. This is the exact amount of insurance you should get now. It looks like you have to do a lot of work to calculate all these things but the good news is that you can do it on your phone calculator. You will be buying yourself peace of mind for several dollars a month.
Term life insurance is usually the best solution for young adults with a limited budget. It means that your life will be insured for some period of time – ten, twenty years or even more. When you are young and healthy, you get locked-in low rates of this insurance. At the end of this period, you probably will have a real job and different insurance needs.
Right now, you had better stay far from such complicated insurance types as whole life insurance. It is expensive and complicated; it is the same as doing calculus while sleeping. Simply buy a term life insurance policy and keep your budget safe. Later on, you may upgrade it as your income increases.
To summarize, you will protect your family members with this insurance. It sounds very strange considering that you just got out of high school. However, do all these calculations, decide what period of time suits you best and sign the papers. Now you may feel young again.