Life insurance calculator is a tool that helps a person to decide the size of life insurance cover. In order to calculate this insurance cover certain information has to be provided: outstanding mortgage balance, other debts, planned funeral costs and financial help for the family.
In order to better understand how the calculator works a simple example can be considered. For instance, Alice has £50,000 of home mortgage outstanding and owes £10,000 to a bank for a house improvement loan. She has also decided that £8,000 is enough to cover her funeral expenses in case of death. Since Alice has two children and a husband, her biggest concern is that her family could suffer financial distress. Therefore, she decided that she wants her family to get £150000 from the insurance company in case of her death. This amount of money will be used as a replacement for the income that Alice now earns in her job. The advisable amount of life insurance cover for Alice is £218,000.
What is more, future obligations also have to be taken into consideration. For example, if Alice wants her children to go to the college that costs £12,000, she will have to add this sum to her insurance cover. It can be seen from this example that the core principle of life insurance calculator is to simply add all the amounts of money that the dependents will need in the future if the insured person dies. Once life insurance cover is calculated a person can start searching for the best life insurance offers.