How Much Life Insurance Coverage Do I Need?
By Wendy Moyer
The main reason most people buy life insurance is to protect their family from financial hardship after they die. Aside from cost, the question that just about everybody asks themselves is, “How much life insurance do I need?” If this question has been on your mind then this article is for you.
In the United States, the average life insurance policy provides about $100,000 to its beneficiaries. This may seem like a substantial amount of money but it probably falls short of your intended goal.
For example, what would happen if you die and any of your family needs long-term care? In today’’s world a hundred thousand dollars of medical attention can be gone through in the blink of an eye.
Most financial analysts suggest that your life insurance policy benefits should be a minimum of six to ten times your annual income. With that in mind, consider how much outstanding debt you currently have.
If you don”t have much debt, then six times your earnings may be sufficient. However, if you owe a lot of money - mortgages, credit cards, long term loans, etc. - then a policy that is a minimum of ten times your annual income would be more apropos.
Remember that if your family relies on your income for their well being, once you pass on they could have a very difficult time maintaining the lifestyle you”ve gotten them accustomed to if they no longer have your cash influx.
Therefore, to help you to determine how much life insurance you actually need you may want to not only itemize your debt, but note what your family’’s daily expenditures are for the next several months. Then add any potential costs that would likely arise over the next five years. These could be things such as the down payment for a new car along with its monthly payments, vacations (you do want your family to enjoy their lives, don”t you?), perhaps the cost of education. And don”t forget the possibility of the aforementioned long term medical care.
Once you have this number, multiply your current annual earnings by a factor of six. Then add the two together and you will get the minimum dollar amount that you should insure your life for in order that your family is at least financially comfortable after your demise.
It’’s surprising how many people are under insured. Hopefully these guidelines will help you to assess and correct your situation.
If the cost of a supplemental whole life insurance policy is beyond your means then you may want to consider amplifying your coverage with one of the very affordable term life insurance policies that are available.
About The Author
And to find out more about life insurance coverage and for more free advice about life insurance, go to http://www.MikesLifeInsuranceAdvice.com
Wendy Moyer is a professional writer.