How do you calculate how much life insurance your parents might need?
How do you determine how much life insurance is needed for their parents?
As an adult child, how do I determine the appropriate amount of life insurance coverage my parents might need to cover their expenses, debts, and financial obligations? What factors should I consider in this evaluation process?
Answer
The best way to determine how much life insurance is needed for your parents is to write down a list of potential expenses that will need to be covered upon their passing. Some considerations include:
- How much debt they have or may have when they pass away (for example, mortgage, credit cards, car loans, etc.);
- Determining their end-of-life plans (ex: funeral costs);
- Determining if you’re financially responsible for their care in their later years (for example, reviewing their health and medical needs).
In addition to their expenses, you should discuss with them what assets and life insurance they may already have in place to cover these costs.
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