Life Insurance - Choosing the Right Amount of Coverage
Life Insurance - Choosing the Right Amount of Coverage
Choosing the right amount of life insurance coverage is often not as easy as it may seem. In fact, there are many considerations to be made and variables to account for when determining the right amount of coverage for you.
Life insurance is considered an important part of maintaining financial security for both you and your family for a few reasons. First, life insurance can replace lost income after the death of a wage earner. Second, life insurance can be used to pay debts, taxes and other expenses when you die.
Because everyone's situation is different, answering the question of "how much coverage do I need?" varies from person to person. There are, however, a few basic questions you should answer when choosing insurance coverage.
What ongoing expenses or financial needs will your family incur should you die prematurely?
Consider monthly expenses such as mortgage payments, rent, living expenses, and other regular continuing expenses. Ask yourself: how much does my family currently need to live each month?
Consider debt from credit card, auto, toy, student, and home loans. Do you want to leave your family with a minimal amount of debt should you die?
Consider tuition and retirement expenses.
Consider expenses that your family may incur as they transition and adjust after your death. Will your spouse need to find a job or change occupations?
What amount of income do you want to leave for your family on a monthly basis? And, for how long do you want this to occur?
What immediate expenses will your family incur from your death?
Consider medical bills, illness related expenses, burial costs, and estate taxes.
What is your current financial and familial situation?
Consider the number of family members, family members with special needs, and your children's future needs.
Consider your existing savings, life insurance coverage, retirement programs, and other assets.
Consider your current income and expected income.
Also, consider your estate tax liability.
Life insurance is an important decision that can play a serious role in your family's future should you die prematurely. Many factors go into choosing the right amount of insurance that is right for you. Speak to your financial professional and insurance agent to help you decide which amount of coverage is right for you.
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