A lot of people either don’t have life insurance or are underinsured. So how much life insurance coverage is sufficient? Well, this all depends on your family situation. The real question is “how much money would be needed to secure your family’s lifestyle for years after you’ve passed away?” As the primary earner, you should take out enough life insurance to cover mortgages, car notes and other short-term and long-term expenses. It is common ground to take out a life insurance policy large enough to allow your family to survive without you for 10 years. For example, If you are earning $40,000 annually, you would need a $400,000 life insurance policy.
Here is a breakdown of how much coverage is needed for various life scenarios:
- You are a single man or woman without children. In this case, you won’t need a large life insurance coverage policy, if any at all, as there is no one being left behind that depended on your income. Basic coverage can be obtained to cover funeral expenses and to repay any debts that you may leave behind.
- You are a married and/or have children. Once you are married or have dependents, it becomes necessary to have life insurance coverage that will secure their finances, at least for several years. You will need to consider immediate and long-term expenses that will be left to your family. Determine how long it would take for your family to take care of the expenses that will be left behind, such as home, personal and car loans, medical insurance, clothing, shelter, etc. If you would like to ensure your children’s education, you should obtain enough insurance to cover anticipated college expenses as well.
Overall, the amount of life insurance coverage you obtain should be based on the needs of your survivors. If you can get a policy that will enable your family to afford food, shelter and debts, then you will be able to rest easier knowing that they will be alright if you were to pass away. If you need help with figuring out which policies to purchase, you can speak with an insurance agent who can go over your budget and life expenses with you.