12 March 2012 0 Comments

How Much Term Life Insurance Is Enough?

So far, I’ve discussed the affordability of Term Life insurance for family protection. In this entry, we’ll discuss how much is enough when it comes to buying a Term Life Insurance policy.

How much do you earn? How many more years will you continue to earn that amount? And how long will your family depend on that income? These questions will help you decide how much Term Life Insurance is enough. Most parents want to provide the maximum amount of protection until their youngest child graduates from college (usually around age 22). If the surviving partner is currently working or capable of being a breadwinner, then income beyond that point might not be essential. If that partner is not a wage earner, however, then income should be provided beyond that time.

Most people believe that the minimum amount of term insurance they should have is equal to 10 times their current income. That multiple of your current income might decrease as you live longer, but inflation, college funds for kids, and an enhanced lifestyle must be taken into account. There is a Social Security Survivors monthly income benefit available to minor children of deceased workers who had coverage. Spouses of the deceased worker can also qualify for income as long as they have minor children in their care – and are not earning an outside income over a maximum amount.

For the stay-at-home parent who is providing childcare and a bevy of other household services, calculate what it would cost to hire outside help if that caregiver died. Whatever the total, purchase a policy that will cover that amount between now and when your youngest child is old enough to have flown the nest.

Coming Up Next: Choosing A Term Duration For Your Life Insurance Policy

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