Just how much life insurance should you buy? The answer to that question is as individual as the circumstances. retirement. You will need to assess the reason you’re buying life insurance coverage to be able to properly answer this. When you can specifically answer the issue “Why am I buying life insurance” you ought to be quite a distance towards determining an effective amount.
The largest pitfall most people make in deciding just how much life insurance coverage they need is in treating this purchase being an emotional decision. Life insurance is a financial product and should be treated as a result. Looking at some life insurance coverage and thinking ‘that’s too much’ can leave you drastically underinsured, and worse, leave your dependents lacking the necessary coverage in case of your death.
The 2nd most common pitfall in determining the quantity of life insurance coverage you need is using insurance to cover debt. While initially one may be lured to ‘cover your mortgage’ it goes against the premise of insurancce which is to insure against a loss. Instead you should be looking at that which you loose financially upon your death.
As noted above, 401K, the first question you have to ask yourself is ‘why shall we be held buying life insurance coverage?’. For many people with dependents along with a debt load the reason behind purchasing life insurance is really our dependents can maintain their lifestyle in the event of the death of an income earner. In short, most of us want to conserve a quality lifestyle for our dependents in case of our death. This is the need and directly leads us towards the answer of how much life insurance coverage we need.
Would you like to keep your dependent’s standard of living in the event of your death. How’s it going maintaining your current quality lifestyle? Again for most of us, that’s done through our paycheck or our income. You’re preserving your quality lifestyle using your income – you’re paying your mortgage and other debts, buying groceries, and all sorts of other necessities involved in everyday living. Should you die, you lose your paycheck – and therefore the ability to maintain your dependents’ quality lifestyle.