Economics Of Life Insurance

When you buy life insurance, you are making sure that in the event of your passing, your loved ones and dependents will be able to maintain the lifestyle they were used to during your lifetime. You can also make sure that there are enough finances to meet the future growing needs of your family. There are various microsoftproductssettlement factors involved in estimating the figure you feel is essential for the financial well-being of your family.

Calculating Economic Value

You need to estimate your life insurance needs on the basis of your economic value which means the total earnings you will be bringing into the family in your lifetime. To do so, you need to include your annual earnings at the present time, the annual increments you can expect in the future, the number of years you expect to work before you retire and the returns you expect from the investments you have made.

Family Composition

When planning your life insurance, you need to take into account the composition of your family. If you have children and other members living with you, and you are paying for their day-to-day and other needs, your expenses will be higher. If over time there will be fewer members living in your household, like when the kids move away, your spending will be lower. You will also have to consider the ages of your family members since the expenses for the upkeep of children are lower than that for adults.

One-time Expenses and Borrowing

You also need to take into consideration one-time major expenses. These will include expenses like paying the college expenses of a child, paying for a wedding, maybe a change in residence or a new car. If yours is a family that does not believe in borrowing to maintain the lifestyle they are used to, you will need to buy life insurance accordingly so that unexpected expenses can be dealt with, without getting the family into debt.

Social Security and Family Support

Your family is entitled to Social Security benefits such as survivors, dependents, divorced spouses, children, parents and retirement allowances. You can take into account this cash the family will receive when calculating your life insurance. You can also consider the possibility of non-working members of the family taking up jobs to support the family, and friends and relatives lending monetary support to the family. You may have been saving for a major expense such as buying a big house or moving into a more expensive neighborhood, and cancelling of these plans can allow the family to use these savings elsewhere.


You need to carefully calculate the taxes your family is liable to pay at present and in the future. These will include federal microsoftproductssettlement and state income taxes and also payroll taxes which are paid annually. The taxes will be calculated according to what the family has saved and the assets in which the savings have been invested. You also have to calculate the savings the family will accumulate and invest, on which taxes will be applicable at a later date.