Do You Have Enough Life Insurance?

Written by , November 18, 2011

Do You Have Enough Life InsuranceLife insurance isn’t something that most of us like to think about. But if we want to make sure that our loved ones are taken care of when we’re gone, it’s something that we should consider carefully. Here’s some advice you need to consider. An alarming number of people have no life insurance, and many others don’t have as much as they should.

Those who are able to get life insurance through their employers often do so, but these policies rarely provide adequate coverage. Most offer a death benefit of $10,000 to $25,000, which is barely enough to pay your final expenses, much less provide for your family. Most people need significantly more than that.

Here is some information and advice to help you decide how much life insurance is enough.

  • As a rule of thumb, many insurance providers say you should have ten times your annual salary in life insurance. This is a good place to start, but you can get a more accurate estimate by adding up your projected expenses.
  • Funeral expenses are usually somewhere between $5,000 and $15,000. This is the bare minimum for which you should be insured. Single people with no dependents and low or no debt can get away with this amount. But for those who are married and/or have children, this is only a small percentage of what’s needed.
  • You’ll need to factor in several years of income. This is where the salary times ten rule comes into effect. If your spouse wisely invests the equivalent of ten years of your income, the interest earned will continue to support him or her for years to come. But chances are you’ll need even more insurance than that.
  • Add in enough to pay off your current debts. If your death benefit must be used to pay the mortgage and any other outstanding debts, there won’t be much left over for your family’s other expenses. Being able to pay off your debts will give your loved ones greater peace of mind.
  • Discuss what your spouse would do about taking care of the kids if you were gone. If you have young children and your spouse works outside the home, he or she will either have to quit work or hire a babysitter. Add enough to account for these scenarios.
  • Make sure your kids will have enough money to go to college. Without you in the picture, the amount available for their college savings will likely decrease. Some parents go ahead and purchase enough life insurance to completely pay for their children’s education, while others leave as much as they would have invested if they were still around.
  • Should the unthinkable happen to you, an adequate life insurance payout is crucial to your family’s well being. These tips will help ensure that they are taken care of for years to come.

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