How to Determine How Much Term Life Insurance to Buy

Term Life Insurance Coverage

One of the most common questions people have when purchasing a new term life insurance policy relates to how much coverage to purchase.

Term life Insurance coverage is generally purchased to provide death benefits to named beneficiaries.

For example,  surviving family members may suffer financially due to lost wages that the deceased is no longer able to provide. In addition, the surviving family member may still be responsible for all of the normal bills like a home mortgage. Savings that would have been attributed toward major expenses, such as a child’s college education, may not grow over time.

How Much Term Life Insurance Do I Need?

Clearly, a family can experience considerable financial hardship when one member of the family passes away, and term life insurance can be purchased in an amount that may diminish or eliminate this hardship.

However, it can be challenging to determine how much coverage you need. For example, if your spouse passes away next year and you are 30 years away from retirement, you may think that you need to supplement 30 years of lost wages.

This is actually one way to calculate the amount of coverage that you need, but it is not the only option.

For example, you may also review your expenses to consider how much debt you would need to pay off for your own income to cover all of your financial needs, and you can purchase enough coverage to pay off those debt balances.

Keep in mind that your need for benefits may diminish when your children move out of your home, when your mortgage is paid off and when other financial milestones are achieved.

In some cases, two insurance policies may be purchased — For example, if your children will move out of the house in 10 years and if your mortgage will be paid off around this same time but you still will not be fully financial independent with your own income at this time, you may purchase a 10-year term life insurance policy and a second 15-year or 20-year term life insurance policy. This is a cost-effective way to purchase the coverage you need.

Please speak with an insurance agent about coverage that may be appropriate for you. We can help you determine the right amount of term life insurance needed to cover your family! Call us at 1-888-773-1181