Deciding How Much Life Insurance Your Family Needs

This broad topic has many facets, but there are some concepts to know and understand that will help you navigate in finding the best insurance solutions for your family.

First, the overall philosophy must be established with regard to the purpose of life insurance:  to help protect from financial disaster in the untimely death of the policy holder.  That will help eliminate some types of life insurance that offer more than that to its recipients.

Here’s why that is important: life insurance is not designed to be used to get rich upon the death of the policy holder.  Those who sell whole-life policies do so in order to be able to offer a policy that not only covers in case of death, but also provides additional benefits through earnings that the policy might accrue by having those options.

The problem with this is that there are much more profitable financial vehicles in which you can place your money that have much higher returns for your investment dollar.  So, you need to decide whether the life insurance policy is going to be in helping your family through the difficult circumstances surrounding your death, or whether you want to make money in an investment.  Hint: the former is the best answer.

With that in mind, there are a few tips that can be used in determining how much life insurance you need to provide for your family.

Term is king.  The simple, neat and complete way of looking at life insurance is to check out a good term life policy.  The premiums are low and the coverage is excellent; especially if you are younger.   Some policies cost less than a dollar per day and provide solid coverage amounts of $100,000 and up depending on age and other factors.

Every situation is different.  The size of your family and the needs that they would have if you were to pass away makes finding a policy and establishing amounts easier.  Things to take into consideration are: what is your present income?  Are you the sole income source for your family?  Do you have young children that will need financial assistance for college?

Things change.  As your children grow up and move out of the house, your insurance needs change as well.  So, your insurance will need to be re-visited every few years to make sure it has the benefits which will help you where they are needed the most.

Contact a professional.  Even with the ease of the Internet, it is still better to have a local insurance agent who can help you in determining the best route to take with regard to life insurance.  A local independent agent has access to many companies and plans, so they can help you select a policy that best fits your circumstances.

Be sure to take time to think about and purchase life insurance.  It is not for you but for those you love who will someday benefit from it.