As I was standing in the cereal aisle in the supermarket last week it occurred to me that choosing how much life insurance coverage you need is like trying to decide which cereal is healthier: Grape Nuts or All Bran? There seems to be a lot of confusion about how much and what kind of life insurance you might need, and why!
Since we're getting so many questions about life insurance – I thought I better do my best to clear the water...
Of course, choosing a life insurance policy is more important than choosing a breakfast cereal, but the choices are nearly as varied. Here's a little information that might be very helpful.
As with all insurance, after you decide you need the protection, the question becomes how much protection do you need, want and can afford. So, here are some guidelines for deciding the amount of life insurance that would be adequate for you.
There is no hard-and-fast answer for everyone, but in general, experts recommend that your life insurance death benefit be about six to eight times your annual earnings. There are also a variety of factors to consider. They include:
* Other income sources.
* Size of your family.
* Whether you have a spouse and whether or not they work and what their earning capacity is now and what it might be in the future.
* The number of people who are financially dependent on you and for how long.
* The death benefits your loved ones will receive from Social Security and any life insurance plan at your work.
* Any special needs such as mortgages, college education funds and estate planning.
The best way to be sure you have the right amount of protection is to consult with a qualified financial planner. They can take all these factors into consideration and come up with the plan that suits your needs.
If you have any questions about life insurance or any part of your financial planning and protection, please call us or send us an email.