• 16
  Feb
  2010

• Know Your Limits: Term Life Insurance

  
  Filed Under: Blogging
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When you are working overseas on a short assignment, your financial sense sometimes takes a beating—the exchange rates are different, and you find the dollar stretches further than you thought it would. In such a situation, it is but natural to think about how much you should get term life insurance for.

To help decide that, remember that any life insurance, and especially term life insurance, is meant to ensure the minimal financial impact of one’s demise. Also remember that term life insurance is of maximum utility to those who are under 30 years of age. So, realistically, you must calculate not just “how much you are worth” but “how much your family will need” to be safe financially.

To calculate that, determine the annual expenses of your spouse and children, add any mortgage payments that are ongoing, an estimate of future expenses such as college education, and add a small amount for incidental expenses. You’ll need to also adjust the rates keeping in mind a minimal inflation rate, and subtract what your spouse will contribute to the expenses.

The figure you arrive at will be a rough calculation of how much term insurance you will need, in dollar terms. Whether you are living at home or as an expat, plan for absolute terms, and not for the currency of the country you live in now.