Deciding How Much Life Insurance You Need

Deciding how much life insurance you need is a complicated issue to just ask about if you are not familiar with insurance. A general rule that I heard a few years back was that you should have 7 years worth of your annual income as insurance. I think you also have to take into consideration your personal financial situation. But everyone has personal goals for their life insurance.

A large consideration in the decision making process is your family situation. If you are not employed as a contributor to the household financially you are obviously going to need less than if you are the sole supporter of your family. You might be thinking that a stay at home mother doesn't need life insurance, but that is not necessarily true. If there are young children in the home and the caregiver passes away there will be extra expenses. Daycare, transportation to events while the remaining parent is working, and some of the services our spouse did for us sometimes that we don't even consider such as eating out more now that the person who handled that isn't here. On the same token if you have small children 7 years income may not be enough to see the children through college. It is something that you should sit down and think about before selecting the face of the policy. Discuss with your agent why you selected the amount you did in case you have overlooked something.

Your financial situation also plays heavily into the selection of life insurance. Some people have a secure future and have a great deal of savings, 401k and pension plan with no debt to speak of. Other people walk around with no savings and large amounts of debt barely scraping by. Obviously the person who has some money set aside will need less than someone who has not been able to do that yet.

There are many options available and you can also do a blend having 2 policy's so that you can drop one later when your need for insurance isn't as great. This post is not intended to be insurance advise. The best thing to do is talk to an advisor you trust will give you clear answers that are based on your life and not a standard recommendation.