How much Life Insurance should one Buy

Financial Professionals usually advise individuals should purchase a life insurance policy with a stated benefit of amounts equaling or exceeding five times their salary. When considering the amount of life insurance to buy, a more complex analysis of an individual’s life situation is required to tailor a policy to fit the individual’s needs.

First, the most common question to ask yourself when making this type of purchase is how could my friends, family or loved financially survive if I should die. Whether your death is expected or unexpected, life insurance is the most selfless purchase you can buy and provides your survivors the financial relief to the unpleasant events as a result of your passing.

Additionally, here are some simple follow up questions to ask yourself and reasons why you would consider these questions when making your life insurance purchase.

How long can my survivors survive, without change to their current lifestyle, without my financial support or with an added burden culminating from my death?

For individuals in a family situation, if you are the primary breadwinner, your spouse or partner may have a significantly reduced level of income should you die. Could they afford a house payment or rent, phone, water, energy bills, childcare, car payments, credit card payments, HOA dues, food, health insurance, costs related to maintaining a vehicle, and any other expenses you have traditionally covered, or the basic needs for survival.

*Remember, with any death, additional costs will arise, including funeral expenses, service expenses, a potential hospital bill, bills from a property owner, all dependent upon the nature or cause of death. A number of extenuating circumstances could arise and only you can assess the risk to your loved ones. Anything can happen at a moment’s notice, but if you regularly engage in activities that could potentially increase the cost of taking care of your misfortunes, seriously consider this question.

Another factor to contemplate when debating the amount of insurance to buy, is, are there future obligations or goals I want to financially provide my loved ones that require a large sum of money?

College, a home purchase, retirement, and if you’re a small business owner, leaving the legacy of your business behind could all relate to this question. How important is it to you for your life-long goals for others to be accomplished despite your lack of physical presence?

Finally, now that you’ve figured out the ideal amount of coverage to accomplish the aforementioned questions, how much insurance can you afford? Ideally, we would all buy million dollar policies but realistically, some of us neglect to purchase life insurance because we do not have a dollar to spare with existing family or debt obligations. It’s important to purchase a policy you’re mentally comfortable with and if the premiums exceed the your budget, the likelihood you’ll let your policy lapse are greatly increased, thereby alleviating the entire purpose of buying life insurance in the first place.

*You can always upgrade, but the most important need to address is finding a policy sooner than later-if we all knew when we were going to die, then life insurance would not be as necessary.