How Much Life Insurance Coverage Should You Purchase?
Once you decide on the type of life insurance you want to buy; term, whole, universal, variable or variable-universal, you'll then need to make another decision. How much coverage do you need? Some questions to ask yourself are:
- What are your primary objectives in purchasing the life insurance?
- Do you have any dependents you care for?
- Are you the sole income provider in your household?
If your life insurance purpose is to simply cover funeral expenses, taxes and debt, you may need less insurance than someone who needs their life insurance to care for surviving family members. If you have a spouse to support, you will need to consider not only replacing your current income, but allowing extra coverage for medical bills and retirement needs. If you have young children you may need to consider how college tuition will be paid in your absence. Those that leave behind older children usually purpose their life insurance to pay for final expenses and an inheritance. Some suggest purchasing such a large amount of life insurance that your beneficiaries can live off of the interest, without touching the principal. It is completely up to you to decide how much life insurance you want to purchase. Thinking about your current life situation and possible scenarios in the future will help you in your decision.
Sources
- How much life insurance do I need? Retrieved May 8, 2008, from http://www.iii.org/individuals/life/basics/howmuch/
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