Life insurance can be tailored to your specific needs, taking into account your family’s financial picture and your future financial security. The amount of life insurance you need depends on your goals, your family, and the expenses you want your family to be able to cover once you are no longer there to support them.
Here are three separate scenarios to consider:
If you simply want to cover your end-of-life expenses and funeral costs so that your family is not burdened by these expenditures, you might want to buy a small term life policy, such as $10,000 to $20,000 worth of coverage.
You would want to choose a larger life insurance policy if you have dependents and you are the primary income earner for your household. People with dependents often buy term policies in amounts ranging from $500,000 to $2 million or more to ensure that their dependents’ needs will be met. Add your family’s cost of living, your personal and household debt and the projected costs of your children’s education as a starting point to determine the amount of coverage you need.
If you want your life insurance policy to accrue value and work for you or for your family as an investment vehicle, you might want to buy one of several different types of permanent life insurance. In this case, you have several different options. For example, you could purchase a $1 million term life insurance policy and begin converting over portions of the policy to a whole life insurance policy each year to build a growing cash account that will serve your needs in retirement.