Shopping for life insurance can be a daunting task. You know you need it, but how much should you buy? You want to make sure your family is taken care of; but, if youre like most people, you dont have money to throw away. Buying too much life insurance means wasting money that could be better spent elsewhere.
Some financial experts tell you to buy a policy equal to 7 or 10 times your annual income, and both of these figures are good general guidelines. However, the amount you should buy depends on several factors that are unique to your situation.
How big is your family? If youre single and have no children, your life insurance needs are probably pretty minimal. You may want to have a small policy to cover your funeral expenses. On the other hand, if youre married with young children, your insurance needs are likely to be more substantial, particularly if youre the primary breadwinner in your household.
What bills do you have? If you were no longer there to provide for your family, what expenses would your insurance policy need to cover? Your mortgage and other debts? Educational expenses for your children? What about basic living expenses? All of these items need to be factored into your decision.
Are you a one-income family? One income families have special life insurance concerns. While a lot of families either dont insure or choose only minimal coverage for a stay-at-home mom or dad, this is likely a big mistake. Consider the role a stay-at-home parent plays in a childs life: taking care of the house, the meals, the transportation, and myriad other day-to-day details. If this parent were to pass away while your children were still young, how much would it cost to hire someone to take care of these essentials?
By taking a look at your familys financial situation and putting together a rough estimate of what would need to be taken care of if you passed away, you can get a better idea of how much life insurance you should buy.
About the Author:
James A. Miller is a leading provider of expert estate planning guidance in Worcester, MA. For more information on life insurance and other estate planning services, visit our website.
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