How much life insurance is enough?
There is no one-size-fits-all when it comes to life insurance. Getting your life insurance plan right takes into account a number of factors.
Hello. I’m Kevin McCormally with Kiplinger’s Personal Finance Magazine here to talk about Life Insurance.
[video: An illustration of an open, silhouetted head shows the text "life insurance" coming out along with various icons.]
When you think about the things you’d really rather not think about, life insurance probably comes pretty high on your list. Not only does it force you to think about your mortality; it also means spending money for something you’d really rather not think about, let alone pay for.
[video: A line chart climbs before it peaks and dips sharply.]
On the good news side, it might not cost as much as you think to buy the protection you need. We have noticed that rates have fallen significantly in recent years. And, face it, ignoring the issue won’t make it go away.
[video: An illustration of a leafy tree with birds changes as the leaves yellow and fall from the tree. A watering can then waters the tree and the leaves return.]
If anyone is relying on you, you may need life insurance because, frankly, your financial obligations might outlive you. Insurance helps to provide you financial assistance even if you’re not there.
[video: A silhouetted couple with illustrations of a pile of money and a home with a strikethrough is shown next to a silhouetted family with the same number of dollar signs next to each.]
But, how much insurance do you need? There are plenty of rules of thumb. Eight times your income. Ten times your income. But such easy answers are really just inadequate shortcuts. Two couples might have equal salaries, for example, but it’s silly to think someone with four young children needs the same coverage as empty nesters with no mortgage and a fat retirement fund.
[video: Term insurance papers are shown next to text that says "steady benefits", "10 years", and "20 years" while permanent insurance papers are shown next to text that says "death benefits" and "savings components".]
Beyond pinpointing how much you need, you need to figure out what kind of insurance is the right kind for you. Term insurance – with its steady benefits and premiums for, say, ten or 20 years? Or permanent, whole life insurance that combines a death benefit with a savings component you can use while you’re alive.
[video: A set of animated charts appear for aesthetic purposes.]
Life insurance is a personal affair; not something to be solved by rules of thumb or online calculators. You might need professional help to get it right. The reward is the getting some peace of mind in knowing that you have the right protection for your family . . . at the right price.