How Much Life Insurance Do You Need?

One may be really puzzled when finding out how much life insurance he/she needs, because there is pretty much all-kinds information about that and not less conditions and aspects. The amount of life insurance may depend on lots of factors, and varies subject to your, for example, expectations and income.

First of all, ask yourself about what you want your life insurance to accomplish. The answer will help you to estimate how much you really need. This matter must be an individual solution, and assessing your life insurance needs requires some consideration.

What’s the Reason I Should Buy a Life Insurance?

Every future policy-holder, before going to an insurance company to purchase a policy, asks him(her-)self if he/she needs life insurance and why. The most popular reason for buying life insurance is avoiding financial difficulties in case of untimely demise of the family member that all the family depends on. In this case it’s a common practice to multiply the annual income by 20 to buy the needed life insurance amount, which will cover you until retirement.

Some policy-holders figure on clearing debts or obligations, if there are some. But you should take into account that in the course of time these debts may (and are likely to) be paid off, especially when your family is two-parent, both spouses working. So, if your family is regarded stable and rather well provided for, you won’t probably need the full coverage. However, in case your family is one-parent, the full coverage may be reasonable, and it makes sense to purchase enough coverage to protect your children in future.

Clearing Debts

Life insurance may seem too costly, and many families, especially newly-made ones, just can not afford it. However, keep in mind that any amount of insurance is anyway better than lack of insurance at all. Try to start with enough insurance to clear your debts and obligations, if there are any, and then extent the coverage subject to the same conditions whenever you are able to.

Unmarried people may expect to cover debts and expenses just by purchasing a small life insurance amount, which is an affordable way to solve some problems.

Smart Buy

However, well-to-do policy holders may want to buy life insurance for reasons of, for example, donating to charity, or providing enough means for the family to pay taxes for a large estate after the insured person’s death and thus saving them from selling assets, or establishing a trust for the family, or something else. Anyway, this is a reasonable purchase.

Make Sure to Review Insurance

Remember, if you are expecting or already enjoying some changes in your life – marriage, happy events, increase of the salary, purchasing a larger house, etc. – your life insurance needs should probably increase. Make sure that you review your life insurance not less than once a year, because life is a bit on the changeable side, and it’s impossible to take everything into account.