Term life insurance is something you would normally purchase to protect an investment such as a home or business. In case of your death while you are still making the payments on a mortgage or a large business loan, the term life insurance will make sure that your family is not left with the burden of the debt and that the debt is paid off in full. The only thing left to determine is how much term life insurance you should get.

Your Income

According to LifeInsure.com one of the ways to determine how much term insurance you should get is to use your age and your current income. The concept is based on your income potential and how much revenue you would potentially generate, and how much debt you may pile up, during the term of the insurance. The younger you are, the more your term insurance should be. For example, if you are 25 years old and make $50,000 a year, then you will want to get 25 times your annual income in term insurance or $1.25 million. But if that same person were 45 years old and made $50,000 a year then they would only need 15 times their annual income in term insurance or $750,000. Insurance should be part of an overall financial plan that includes retirement savings and other savings vehicles. The older you are, the more likely it is that you have these other savings programs in place. If you do not have savings in place, then you may want to consider purchasing more term life insurance even at an older age.

Your Retirement

Cashmoneylife.com offers a term insurance concept based on creating retirement income for your spouse. If you and your spouse have put together a retirement savings plan, and you want to protect each other in case one of you passes away before retirement, then term insurance is a good way to do that. For example, if you and your spouse are 45 years old and you want to develop a $1 million USD nest egg for retirement, and you have already been saving into a plan for 20 years, then you will want to get term insurance to cover each other in case something should happen. If you have saved $500,000 of the $1 million at age 45, then each of you would get a 20 year term life policy worth $250,000, which represents your half of the retirement income.

Your Investments

Sometimes the amount of term life insurance you need can be directly tied to your investment. For example, if you get a 30 year mortgage for $100,000, then you can also get a 30 year term life policy for $100,000 to cover the mortgage in case something happens. This is also effective for protecting a child's college fund or any other long-term investment that needs to be satisfied when the time comes.

Source:

GoodFinancialCents.com - How Much Term Life Insurance Do You Need to Buy?

CashMoneyLife.com - How Much Life Insurance Do You Need?

LifeInsure.com - Term Life Insurance