How much term life insurance does a person need?

If you have a family to protect, you need to make sure you have sufficient life insurance coverage in place, but it can be hard to know just how much coverage you need. Deciding how much life insurance coverage you truly need can be a difficult process, but there are some guidelines you can use to help you make the right decisions.

Protecting the Family Home

If you own a home and have a mortgage, you want to make sure your family will be able to make the house payments even if you are not around. Protecting the family home is a big part of the life insurance equation, and having a mortgage is an important reason to have sufficient life insurance coverage.

One of the best ways to protect the roof over your head is to purchase mortgage life insurance. This special form of term life insurance has a death benefit that is tied to the amount of your mortgage, and those proceeds can be used to pay off the mortgage in the event of your untimely death.

Paying for College

If you have people who depend on you, it is important to have plenty of life insurance coverage. Raising kids is not getting any cheaper, and it is important for the life insurance you carry to provide for your minor children in the event the worst happens. If you plan to send the kids to college, it is important to research the likely costs of that education and use those numbers to purchase the life insurance coverage you need to send your kids to the school of their choice.

Providing Optimum Coverage

If you want to provide your family with the ultimate coverage, it is a good idea to look for an amount that will allow your family to live off of the income the lump sum can provide. Since many financial experts recommend using a withdrawal rate of no more than 4% to ensure the money will last, that means life insurance with a death benefit equal to at least 25 times your annual salary. While that may seem like a large number, keep in mind that term life insurance can often provide high levels of coverage for a low price, especially if you are young and healthy.

Source:

Life insurance article from CNN

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