Quickly Calculate How Much Life Insurance You Need With the 20-20 Plan
Life insurance is easy to ditch. This is similar to what you do later in life, and it seems difficult too. To get things off the ground and make sure your loved ones are protected, financial planner Carl Richards suggests what he calls the “20-20 plan.”
There are many ways to calculate and account for how much life insurance you need , but Richards argues that finding the perfect life insurance plan often prevents people from coming up with a good enough plan. He explains the first step of his plan – figuring out how much you need:
Multiply your salary by 20. First, you must decide how much life insurance to buy. This is where most people get stuck. You won’t get stuck. Just take your income and multiply it by 20. For example, let’s say your income is $ 50,000. Take $ 50,000 multiplied by 20 and you get $ 1 million. This is the amount of life insurance that you buy. This goes a long way in offsetting the economic losses that may arise if you are no longer around.
From there, he suggests simply taking a 20-year policy for this plan. Richards says that term life insurance is the cheapest and easiest policy you can buy, and as long as you pay your premiums, you will be insured for the full 20-year period and your premiums will not increase.
This is not a perfect plan, but enough to get you started. And it’s better to start than to have no plan at all. Check out his full post at the link below.
Life Insurance Made Easy | New York Times