Before you can answer the question of how much life insurance you should have, you need to determine the monetary needs of the beneficiary or beneficiaries that are named on your policy. In most cases, people buy life insurance to protect their immediate family. While life insurance cannot replace the loss of a loved one, it can replace the lost income generated by that loved one.
No Magic Formula
Don't let anyone tell you that you should buy life insurance equal to five-times your annual salary. Don't listen to people who say everyone needs at least a one million dollar policy. Life insurance calculators can be misleading. There is no fixed and hard rule about the amount of life insurance you should carry. While two individuals can earn the same salary each year, they may not have the same financial responsibilities. Age, lifestyle, health and a number of other variables may all factor into the equation for choosing the right amount of coverage. Consider some typical scenarios when you should have a life insurance policy.
Young Married Couples
Why would a young couple in their twenties and without any children need life insurance? While both may be in perfect health, healthy people die in accidents every day. If both husband and wife work and both incomes are used for household expenses, the loss of one person could place a financial burden on the surviving spouse. Assuming both husband and wife work, or are capable of working, it makes sense to buy enough coverage for the surviving spouse to adjust to the new situation they face.
Couples or Single Parents with Young Children
Young children are highly dependent on their parents for just about everything. Before something happens to you, it would be comforting to know that the financial resources would be in place to provide for your child until he or she reaches the age of maturity. Buy enough coverage for your child or children's food, clothing and shelter needs, as well as college tuition costs.
Older Couples Nearing Retirement
These days, more and more people are living longer lives. Many live well into their 80s and even into their 90s. When one spouse predeceases the other, the surviving spouse may live another 10 or 20 years. If you don't want your life partner to live on Social Security alone, the proceeds from a life insurance policy can make life a little easier.
Questions to Determine Income Replacement Needs
- What are the expenses facing your beneficiary or beneficiaries?
- How much do you have in savings and other financial assets?
- What is the earning capacity of your beneficiary or beneficiaries?
Your independent insurance agent can help determine the life insurance needs of your family. Get a personalized evaluation today.
Get personalized assistance today. Call Owen & Associates at (770) 422-0456 for more information on Marietta life insurance.