A life insurance is a tool to ensure financial stability of your family after your death. The decision to take life insurance is totally based on how much investment capital will be needed by your family to meet immediate obligations at the time of your death as well as to sustain the household.

In order to know exactly how much life insurance you need, you may take the help of life insurance calculators. These calculators are automated tools which help to calculate the exact amount of life insurance that will be required to cover you and your family. The estimates given by life insurance calculators depend on the information you provide.

Information required in life insurance calculators

Let’s now check out the various information you need to enter in a life insurance calculator. It’s important to note that the more correct information you’ll enter, the better estimate the calculator will provide.

1. Short-term needs -
   • Final expenses: The term ‘final expenses’ means any sort of medical, hospital or funeral expenses that will be required at the time of your death. It also includes attorney fees and final estate settlement costs.
   • Outstanding debts: Here you’ve to enter information regarding all your outstanding debts like credit card debts, car loans, home equity loans, any outstanding bills, etc.
   • Emergency expenses: You also need to estimate and enter an amount that will help your family to meet the emergency expenses like medical emergencies, car repair, home repair, etc.

2. Long-term needs –
   • Mortgage payment fund: You need to enter an estimated amount of money that will be needed to pay off the entire mortgage or rental payments.
   • Education funds: You need to enter the details of your child’s education. The information includes the type of school your child is studying (private or public), the present education cost including tuition fees and accommodation costs, years to g before your child goes to college, etc.
   • Family maintenance costs: This includes all costs regarding child care, food, clothing, grocery bills, utility bills, entertainment, insurance and transportation. The formula generally adjusts for a certain percentage of annual inflation rates.
   • Annual income required: You’ll have to enter the total annual income that your family will require in case of your death.
   • The income payment term: You’ll also need to enter the number of years you need the income to be provided to your family.
3. Assets: In the assets section, you need to enter information about your savings, stocks, bonds, mutual funds and other life insurance that you have. It’s important to note that you should never include any information regarding your investment in retirement plans like 401(k) plans or IRA plans.

Life insurance is one of the best ways to show to your family and your near and dear ones that you care for them. If you carefully enter all the correct information regarding your savings and estimated expenses, the life insurance calculator will help you by estimating how much insurance you will need. Thus, life insurance calculators help to simplify the, otherwise, difficult process of buying life insurance.