How Much Life Insurance Is Enough?
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| Even if you know why you need life insurance, there is no
simple answer to the question of how much is enough. Most people buy life
insurance to replace income that would be lost with the death of a breadwinner.
The policy provides funds to help replace the deceased's paycheck and may also
provide income for long-term needs, such as retirement, college costs or estate
taxes. |
| Life insurance also provides money for immediate needs, such
as expenses for final illness and burial. And some people use proceeds from
life insurance policies for readjustment money -- temporary funds for family
members who will need time to make important decisions about moving or looking
for a job. In essence, it is up to the individual purchaser to figure out how
much life insurance is enough. |
| Some experts suggest that life insurance should equal five
times your total annual take home pay. However, this rule of thumb may not
always apply because no two families are alike. You will need to answer some
important questions about yourself before deciding how much life insurance to
buy. |
WHO ARE YOU?
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| Are you a young, single person with few or no
responsibilities for others? A single parent with children to support? About to
retire and caring for your own parents? Are you a parent with dependent
children? A middle-aged widow or widower with no children, but a parent to
support? |
| These are not idle questions. If you can identify your
responsibilities, your financial resources and, in the event of your death, who
should be protected financially and in what amounts, you will make a wiser
insurance purchase. |
| By completing the Personal Financial Statement that follows,
you will have an excellent basis for analyzing your life insurance needs. Be
sure to include your spouse as you carefully consider the portrait you are
creating of yourself and your family's future needs -- and how you can best
meet them. |
