How Much Term Life Insurance Do You Need?

So you’ve probably seen some commercials lately about how term life insurance premiums are at historically low levels and you should take advantage of those lower prices now. But first, here is a quick tutorial and advice on why you should have life insurance before discussing how much an individual should own.

So what is term life insurance? A term life insurance policy is one that has a set time frame on the coverage period – anywhere from one to thirty years – and when it reaches the end of that term, you can decide whether you’d like to renew it or not. Term policies provide no cash buildup like whole or universal life insurance – it only provides a payout at the time the insured dies.

The first question you need to answer is do you need life insurance. Typically people without dependents generally don’t, while people with spouses and families normally do. The primary purpose of life insurance is to replace income if a breadwinner dies.

Here are some of the questions you need to ask yourself in determining how much life insurance you need:

1. How much income would your spouse and your children need to replace your income over a period of years based on your current age?

Online life insurance calculators found at most business news and personal finance websites can help you address these question – just do a search for “life insurance calculator” and you will see many sites that can help you with these questions. Keep in mind that youth, health, and whether you smoke or not will also be factors in how much insurance you can afford to buy. And keep in mind that life insurers will investigate suspicious claims, so be honest about all facts you report.

One final thing – Don’t buy insurance and forget about it. Make sure that every few years you are reviewing your insurance policies as part of your overall financial situation. Life circumstances change – incomes rise and fall and family size changes. Your insurance requirement always need to reflect current needs and conditions.