| SUBSCRIBE TO MONEY |
How much coverage do you need?
If you're going to buy life insurance, make sure you've got enough.
In Lesson 20
| ||
| ||
Money 101 Lessons
|
There is no simple answer to how much coverage is enough.
Some financial planners say you need enough insurance to replace five to seven years of your salary. If you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary, they say. That would mean a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of coverage or more.
Remember, the sole purpose of life insurance is to replace your income in case you die, so that your dependents can maintain their current lifestyle.
Factors to consider include whether the surviving partner will have child care expenses if one partner is out of the picture. Do you have other assets on which to draw? Will your children be out of the nest soon? These, and many other factors, influence the decision on how much coverage you need.
Buying a whole-life policy doesn't necessarily mean you are fully insured. Because of the investment component of whole life, the policies are much more expensive than term. Don't simply buy less coverage, as it defeats the purpose of buying insurance in the first place: to cover dependents.
Next, you've got to figure out how long you need the policy.
-
These 5 cities have the fastest-growing foreclosure rates. And they're not the usual suspects. More -
Now you can get the $8,000 credit through June 2010 -- or $6,500 if you're not a first-time buyer. More -
Home prices are forecast to plummet, but these 7 cities are predicted to post gains. More -
Home prices have grown in the beer-guzzling heartland and fell in the wine-sipping coastal states. More -
Investors think Detroit's foreclosed houses are a deal. Would you buy this one for $6,900? More -
Economic growth, affordable wages -- these spots have what entrepreneurs need to thrive. More
