This is a great question to ask. It means you are concerned about protecting your loved ones in case something were to happen to you. But a better question to ask is: How much life insurance do I need at this point in my life?
There is an industry rule of thumb that says you should have about eight to 10 times your salary in life insurance coverage. A rule of thumb, though, should really be called a “guide of thumb,” because it’s a starting point, not an end point.
Take these two examples: Parents in their 30s with three kids under 10, and a big new house with a mortgage to match. Or, parents in their 50s with kids out of college and on their own, and a home with a paid-off mortgage. Now, the eight to 10 times your salary “rule” may end up being too little for the first family and too much for the second.
Instead, it’s important to look at what you need the life insurance to do. Typically it’s used to pay for:
If your family would experience financial hardship if you died and they had to continue paying for these obligations on their own, then you need life insurance.
The solution, though, is straightforward. Start with an easy online Life Insurance Needs Calculator. With a few inputs, you can get a good working idea of how much life insurance coverage you need. Then it’s a good idea to contact an insurance agent, who can walk you through your specific needs. Again, the figure you get from the calculator is a good indication, but an agent can help ensure that you’re adequately covered.
In addition, an agent can also conquer that second fear that people have, not knowing what kind to get. The term versus permanent life insurance conundrum doesn’t have to stop you from getting coverage either. To learn more what kind you may need, read “The Big Debate: Term vs. Perm”.
The bottom line, don’t let unknown numbers stop you from getting the coverage you know you need to help protect your family.
You’ve taken an important step by deciding to go through the life insurance application process. Here’s what you need to know.
Smart financial planning today can leave your family with a debt of gratitude.
If you have life insurance, it’s possible that you may have more than one policy—or need more than one.