Life Insurance. What is it?
The life insurance industry seems to complicate this coverage. It is a shame, too, because it can be simple. Unlike auto and home insurance, life insurance is rarely required by the government or a bank. It is your choice to buy life insurance if you feel you have an obligation that might last longer than your life. I have read that you need 5 to 7 times your annual income.
Some people may want to deduct what social security would pay to the survivors from the annual income needs. Just remember Social Security pays a dependent child until he/she is 18 (up to age 19 if attending elementary or secondary school full time), and only pays the surviving spouse until your youngest child is 16. The benefits might change as the belt tightens on Social Security so be sure to check on line at http://www.ssa.gov/.
If you have a sizable estate, you will want to work with an attorney/ planner to look for ways to lower and pay the probable estate taxes. One more note, after you determine the insurance needed, figure out what you can afford to pay in premium to cover that need. Can you afford a dollar a day or two, three, four, five…, or annually a specific amount? Be honest with yourself. If you can buy all you need with that budgeted amount, great! If you can’t, buy what you can. The purpose of life insurance is not to make you feel broke; it should relieve pressure rather than create it.
