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Article supplied by Jonathan
How Much Life Insurance is Enough?
You know you need life insurance. Your
loved ones depend on your income, and in the event of your death, losing that income would only make a
terrible situation worse. Maybe you've already bought a life
insurance policy. The question is: do you have enough life
insurance?
The amount of life insurance you need is dependent on several factors:
Your Income
Your income is the biggest determinant when it comes to buying the right life
insurance policies. Insurance experts have long recommended that
you purchase a policy that guarantees your family your yearly salary for 15 years. So, if you earn $40,000 per year, you should purchase a policy that is
worth $600,000. If you figure for inflation, add 5% to the
total. Of course, the source of your income will affect your
insurance needs; if you are nearing retirement, and part or all of your income will come from retirement
benefits or investments that will cede to your loved ones after your death, you may not need as much life
insurance as a person who is years from retirement.
While a policy that covers your income for 15 years is the best route, you may need
more or less insurance, depending on other aspects of your family's life. Figure in how the following factors
will affect the income your family needs:
Your Family
A person with two teenaged children has different life insurance needs than a person
with three small children, or a person whose children are grown.
When shopping for life insurance, keep the next 15 years of your family's growth and development in mind. One thing to consider is the cost of educating your children. As you probably know, the cost of a university education is often beyond
the financial abilities of many parents. While you may have had time to develop a university savings fund for
older children, that may not be the case for younger kids. As the costs of attending university grow,
providing for children who will be attending university in 5 or 10 years will be vastly different. Your
financial planning should reflect that difference.
Your Debts
If you owe significant debts, especially on a family business or the home your family
lives in, your life insurance policy should be sufficient to pay off those debts, or your family's home,
livelihood and financial stability is at risk. On the other
hand, if you are debt free, your family may need less income to stay financially sound after your
death.
Your Final Costs
Unless you've made other financial arrangements for your final costs, your life
insurance policy should include enough to cover the costs associated with your funeral and burial.
Choosing a life insurance policy that's right for
your family's needs can be overwhelming. An insurance agent can
help you with this decision, but you can also use web-based tools offered by insurance companies to get an idea
of how much insurance you need and what the costs are.
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