How Much Life Insurance Should You Have?
One of the biggest questions when buying life insurance is: "How much should I have?" It seems like what you're really asking yourself is "How much money am I worth?" This can be frustrating, because buying life insurance is about much more than how much money you are worth. It has to do with your earning potential, your debts and the people you want to take care of. Buying life insurance doesn't have to be confusing or frustrating if you have a basic idea of how much you want to pay for your insurance, what type you want to get and what you would like to have covered should something happen to you.
Before you begin the life insurance quest, you need to know how much you owe on your house. Now, write that number down. You're going to be doing some math. Now, let's consider your other debts. Car, credit cards, personal loans, etc. You want to make sure that all of these things will be paid off in the event of your death. Also, do you have kids? If you do, consider their ages and how much college will cost. Most people choose to round out an amount and add it into the total amount of money they will need. Are you married? Do you want your spouse to have a certain amount to live on for about 10 years? These are the main factors you should consider when deciding how much life insurance you should have.
Another way to decide how much life insurance you should have is to take your current yearly salary and multiply it by 10. This will usually allow for your home to be paid off and your children to be sent to college, plus a little extra. This is more of a "how much am I worth" approach and doesn't consider increased earning potential, but it can be a great way to determine how much life insurance you should have.
The next thing that you should do when deciding how much life insurance you need is to consider how much you can afford to pay for your coverage. Many people choose term, usually at about 20 year intervals, but the older you are when you buy the insurance and the higher the coverage, the more you will wind up paying, so you're working to decide on how much life insurance you can afford right now.
The most important thing to remember is that while you may not be able to afford to have as much life insurance coverage as you would like, you may find that your loved ones will get by very nicely with what you are able to provide. Remember, even if you can only afford enough life insurance to cover the cost to pay off your home and send your children to college right now, you will have the major costly basics in life covered. As you earn more money, you can increase your coverage amount if you should choose to.
