How much life insurance you need depends on many different factors, including, where you are in life, the size of your family, and your income and savings. Many young families don’t carry enough life insurance. Here are some factors to consider in deciding whether you have enough:
- How much of your salary does your family use to meet necessary expenses? If you were to pass away, how much financial support would your family need to meet its financial obligations, and for how long?
- What would your family’s immediate financial needs be paid if you passed away? This includes joint debts and continuing family expenses. Do you have savings to cover these expenses, or should your life insurance be used for these items?
- Do you want to leave money behind for your children’s college education? How about as an inheritance? Do you have money saved for this, or do you need life insurance for this purpose?
- Are you a single-breadwinner family? If so, does the stay-at-home spouse have life insurance? This is one area in which many young families are under-insured. Consider the amount by which your family’s expenses would increase if the stay-at-home spouse passed away: would you have to pay for a nanny or a housekeeper? Would the working spouse need to take time off to be at home with the children? All of these considerations factor in to life insurance calculation.
How much life insurance is right for your family is a very individual decision. Many financial advisors offer a complimentary life insurance analysis, so that you can determine whether your current life insurance policy meets your needs – and whether it’s the most cost-effective choice for your family.