There is a lot to consider when you are in the process of getting a divorce. Deciding who should have custody of the children is only a portion of what you need to consider.
Another important thing you will need to consider is how much life insurance to purchase. Many states have requirements that both parents maintain life insurance policies, as part of the divorce decree. There are a variety of ways to calculate the amount of life insurance to invest in. Here is one:
- The first thing you will need to do is figure out your annual income needs. You accomplish this by deciding how much your family will need in the event you pass away. This may include various expenses such as funeral costs, medical payments, mortgage payments, groceries, utility bills, etc.
- Then deduct your current available income from the annual income. You will also want to deduct employment income, interest income or dividends.
- Figure out the principal that’s needed to produce income that will need to be replaced. All you have to do is calculate your ‘annual income to be replaced’ and divide it with the ‘rate of return’. The total is the amount of principal that you will need.
- Add the expenses your family will need to pay such as funeral and burial expenses. Other expenses include administration costs to clear up business with your estate and outstanding debts such as loans, credit card debts, and other debts. Then add the total to the principal amount you calculated in #3.
- Add your earnings from your life insurance and other assets or payouts. Deduct this amount from the #4 amount and this is the total amount that you will need to purchase life insurance for your family.
Now that you have calculated how much insurance you will need for child support after getting a divorce, you will want to plan to re-evaluate your financial situation once in a while. If you have a sudden change in your life that will require additional life insurance, then consider purchasing more.
Call Jeff Pennington today at 1-877-221-6198 to discuss your needs and get a selection of life insurance quotes for your situation. Jeff can answer all of your insurance questions and will provide friendly personal advice.