Calculating life insurance needs requires a simple (sorta) formula

Posted: August 10, 2012

Dear Harry: For many years, my employer has provided us with group term life insurance. It appears now that they will terminate the plan on Aug. 31, 2012. That means that I'll have to buy my own. Their insurance company is offering us continuing coverage at our present level and a 2 percent increase in the premium for the next five years. They sent a rep to speak with us, and he suggested that I really need more insurance to protect my family fully. The company has some kind of computer program that gave him an answer in less than a second. Is there some way that I can check out his numbers?

What Harry says: Most ofcoursely! It involves getting the total of four figures and making one deduction. Start with the roughly $13,000 your family will need for funeral expenses. (I hope this didn't bowl you over.) Next, get a total of your debts, including mortgages, credit-card balances, car loans, etc. Third, tally up the estimated costs of children's college education and weddings. Fourth, multiply your income by the number of years remaining until retirement, but not more than 10. Finally, subtract the value of your assets other than your home. Get at least two companies to give you quotes for five-year and 10-year renewable and convertible term. As a safety precaution, make sure the company you choose writes the same policy on New York residents.

Email Harry Gross at harrygross@phillynews.com or write to him at Harry Gross c/o the Daily News, PO Box 8263 Philadelphia, PA 19101. Harry urges all his readers to give blood — contact the American Red Cross at 800-Red Cross.

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