How to use rule of 72 to find how much insurance I requirement?
Simply heard that for approximate calculations we can use rule of 72 to find how much insurance is needed.
For Example my assests are worth $200,000 and loans are 220,000. Final expenses 50,000 and my people will need $54,000 per year in casing of my death.
Can we use rule of 72 to find my need of Life Insurance. If yes; How ??
"Rule of 72" has to do beside calculating the compounding of interest.
Answers: "Rule of 72" is an investment permanent status that allow you to determine how much interest (rate of return) you need to earn in a constant period of time to double your money.
For example - to double your money in 8 years you have need of 9% interest.
I have never used that to calculate a go insurance need.
Here are a couple of simple ways to calculate your call for.
1.
If your family needs $54,000/year the easiest path is to figure out what rate of interest the death benefit proceeds could be invested at. If you could go and get 5.4% interest on an investment than $1,000,000 will provide that level of income for life.
2.
You should probably capture at least 760,000 based on this particularly simple calculation:
54,000 x 10 years = $540,000
plus loans of $220,000
This is an oversimplified way of looking at your insurance obligation. I recommend that you meet a local broker or agent to do a more thorough review and find the right policy for you.