How Much Life Insurance Should I Have?

Nobody likes talking about life insurance. Let’s face it, it’s not very fun planning what needs to be done in the event of your death. But can you imagine being the person who does have to do the planning after you are no longer here? There are 2 common questions that I come across when helping my clients with their life insurance plans. HOW MUCH COVERAGE SHOULD I HAVE? And WHAT TYPE OF LIFE INSURANCE IS BEST?

The amount of coverage you really need is only something that you and your loved ones can decide. It is a very personal decision. I urge many people to consider what they want their policy to be able to do. Do you want to pay off the whole mortgage or just a portion of it? Do you want to be able to pay off all of your liabilities? Do you want your spouse to have to go get a job right away or do you want that person to have some time off? How about your kids? Do you want to pay for their college even though you are no longer here? These are the types of questions that we need to ask our selves when deciding how much coverage we need. The Insurance Information Institute recommends an individual carry as much as 12 times their annual salary in life insurance.

There are 2 general types of life insurance, Term Insurance and Cash Value Life Insurance (Mainly Whole Life). Term Insurance allows you to purchase more coverage for your buck. You can purchase the insurance with a guaranteed premium for either 10, 15, 20, or 30 years. The guaranteed premium means that during the 30 year term policy your premium will not change for the 30 years that the policy is in force. Term life insurance if great for everyone, especially for those who need the coverage but worry about their monthly budget. Cash value life insurance is a little more expensive. Let’s talk about whole life. Basically, unlike a term policy which has it’s 30 year limit whole life never expires. The premium is often times guaranteed for as long as you live. Whole life also builds cash value which can sometimes be used as a retirement tool. But like I mentioned, whole life is more expensive than term insurance which can sometimes not make too much sense when dealing with One’s budget. Personally, I feel that if someone is looking to help out with retirement there are better investment options available than doing so through life insurance.

So pull out your life insurance policies and review them today. Make sure you have enough coverage and that the premium is affordable for as long as you need the coverage.