Life Insurance – How Much?

Do you need life insurance? Maybe not. The main reason to purchase a life insurance policy is for the death benefit - life insurance is designed to protect survivors of the insured. If your family or other people depend on your income, you need life insurance to help them live without your support if you pass away.

No general formula exists to know how much coverage is enough. Examine your current and potential family situation. A rule of thumb is that you need at least three times your annual income and at the most ten times - enough to replace the insured’s paycheck, cover daily living expenses and pay the insured’s final medical bills and burial costs. In addition, the insurance proceeds should provide income for long-term needs such as retirement, estate taxes or college costs.

Call the Life Insurance Advisers Association at 1-800-521-4578. They will put you in contact with an adviser to determine your insurance needs and they sell no policies.

Resource: Everyone’s Money Book, 2^nd ed., Jordan E. Goodman, 1998, p. 502-504.

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