Life Insurance -The Basics

To clear up any misconceptions, life insurance is designed to protect your loved ones from financial loss in the event of your death. Knowing this, it's important to establish whether you need life insurance and how much you should purchase.Do you want to learn more? Visit the ultimate guide to choosing your insurance policy.

 

You generally need life insurance if: 

You have a spouse

You have dependent children

Relatives or elderly parents depend on your income

Your retirement funds are not enough to provide for your spouse's future

You own a business

You have a large estate

 

If you don't have dependents, you may still wish to purchase a life insurance policy to avoid becoming a financial burden to your loved ones in the untimely event of your death. Young singles also benefit from purchasing life insurance while they're young and healthy, allowing them to secure a low premium for years to come.

 

Figuring out how much life insurance your loved ones would need to maintain their quality of living can be tough. Generally speaking, experts recommend purchasing between 5 and 10 times your annual salary. But, as MetLife points out, your exact need for life insurance will depend on your personal and financial circumstances.

 

You can get a ballpark estimate of your life insurance needs by first totaling the funds your family would need for the abovementioned items.You can find helpful worksheets online that will help you organize and come up with this list of expenses.

 

After you've totaled your expenses, take stock of the funds you have in cash, savings, retirement accounts, bonds, property, pension and Social Security. Subtracting your financial resources from your expenses will give you a rough idea of how much life insurance you should purchase.

 

When it comes to choosing how much life insurance to purchase, it's a good idea to get an idea of your needs before buying a policy--but your licensed life insurance professional will undoubtedly help you choose a dollar amount that accurately reflects the needs of your beneficiaries.