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How To Compute Your Life Insurance
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Note: Simply replace the figures, in the table below, to suit your situation.
EIGHT STEPS TO KNOW
YOUR
LIFE INSURANCE NEEDS |
| 1. TOTAL
Annual Family Income (Include all sources) |
P1,000,000 |
| 2.
MULTIPLY BY % of Annual Family Income Needed to maintain current standard of living (70% with children, 60% without) = P700,000 |
X70% |
| 3.
SUBTRACT Annual Income Available to your Family after your death = P252,000
Spouse’s Income, if any = P400,000
Annual SSS benefit (social security) = P48,000
Other sources, if any = 0 |
P252,000 |
| 4. DIVIDE
the sub-total from Step 3 by a reasonable interest rate (rate of return) that could be achieved (P252,000 divided by 8% (.08) equals P3,150,000) |
8% |
| 5. ADD
final expenses (funeral, medical, taxes, etc.) |
Plus
P80,000 |
| 6. ADD
outstanding debt (mortgage & auto loans etc.) |
Plus
P60,000 |
| 7.
ADDITIONAL funding needs (educational funds, emergency funds etc.) |
Plus
P500,000 |
| 8.
SUBTRACT existing life insurance and cash savings |
Minus
P1,200,000 |
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APPROXIMATE additional life insurance needed |
P2,590,000
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