The question of how much life insurance one needs tends to confuse people. But the reason it tends to confuse them is that they don’t like to think about it. When you are thinking about life insurance, you are thinking about your own death. You are thinking about leaving your beloveds behind and being separated from them. And–life insurance is boring, isn’t it?
But what’s the right amount?
The amount of life insurance you need first depends on whether you need it at all. Now, if you’re out of school and working professionally, the odds are that you do need it. And it’s important to know this because the younger and the healthier you are when you buy life insurance, the lower your premiums are for the face amount you need. However, having said that, if you are 25 and working but you’re single and have no children and are renting a studio apartment, you may have a justifiable case for needing $0 worth of life insurance.
The purpose of life insurance is to replace your income if you die before being able to build up sufficient financial assets. So, if you have someone depending on you to earn a certain amount of income during a period of time, life insurance is the way to go. Let’s say you are a young, 30-year-old husband and your wife is a stay-at-home mom. You have little or no savings, small children, a mortgage, and some bills as a result of buying furniture and appliances to establish a household. If you were to die, your family would be financially devastated. You are a prime candidate for life insurance. So, instead of buying a whole life policy, you take out a less expensive 30-year term policy. You invest the difference between what a whole life policy would have cost, and what your premium is for the term policy.
Let us fast forward. You are now 60 years old. The children have grown up and have finished school, the mortgage and other bills have been paid off. For the past 30 years you have been making regular investments, which have grown to a substantial nest egg. At this point, there is no further need for life insurance. The insurance policy that you took out 30 years ago has enabled you to buy time by protecting your family while you were accumulating the nest egg.
Many life insurance companies provide the means of getting online quotes like Advantage Term Life. On their homepage you can fill out a form and get an idea of the amount of insurance you need to buy.
Having adequate life insurance is one of the wisest investments and decisions everyone needs to make. My advice is to take time right now and secure your family’s future today.
Popularity: 5% [?]
Tags: advantage term life, life insurance, term life insurance, whole life insurance
January 7th, 2009 at 11:46 pm
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
January 12th, 2009 at 2:21 pm
Good article. Regarding your comment about not needing life insurance anymore, as you have built up a substantial nest egg, converting your term policy into a permanent policy or purchasing a new permanent policy at this point might make sense. In the scenario you mentioned, the strategy could move from income protection to asset protection. You don’t want to leave your heirs with assets that need to be sold in order to maintain a lifestyle.