Awhile back I saw a page on a website that, unfortunately, I can't share for legal reasons, that stated that you only need to have life insurance that amounts to three times your annual salary. This bothers me and no, not because I think that folks should purchase more than that as a rule of thumb but because every family and individual are unique and have unique needs and responsibilities. It's highly unlikely that a qualified life insurance agent would lead you to believe this. Why? Read on.
Here's an example of why this won't work for most people.everyone. Let us say that we have a family of mom, dad and two kids where the children are young, ages 7 & 5, respectfully. The wife is a housewife and has no real job skills other than working at McDonald's as a teenager, which was a long time ago. The husband brings home the money and makes a decent income of around sixty thousand annually and, like most of us has bills to match that annual salary.
They live in a nice three bedroom house that they're buying, have two cars financed Health Insurance which, even though he gets it as a employee benefit for himself (after deductibles), is required to pay to have the family covered. They also must pay auto insurance for two cars, life insurance for 4 people in multiple amounts, homeowners insurance, dental coverage and don't forget all of the other frequent expenses such as food, clothes, utility bills, ect. Also, they need to send money each month to pay for their mother who is in a nursing home.
There are many other variables that could be mixed into this and I could very easily add more and more monthly expenses, but do you see how the bills added up for this family?
This could be similar to your own circumstances, give or take. In the event of this man's unexpected passing do you really believe that three years worth of his annual income would be enough life insurance for their family? Let's do some figures.
With the man of the house earning an annual paycheck of $60k that multiplied by three years would give their family $180.000.00 benefits of life insurance. This could probably be stretched into 4 years worth of finances considering that the breadwinner is now gone, but that only brings the children to the ages of 9 and 11, what then?
It's feasible that the man could have allowed for this occurence, even beyond regular life insurance, by also taking out a "Mortgage Life" policy that would pay off their home in the event of his death. He may have also made provisions in the car contracts. But what if he didn't? Even if he had done this it still might have stretched the families living expenses another 3, maybe 4 years, depending on how much they cut back on unnecessary things. That would bring the kids to the ages of thirteen and fifteen now. What about the next five years until the youngest child turns 18? What about college for the two of them? Do the couple's parents have burial insurance? They may not if this couple is already sending money each month for the mother's care.
This is all simply a quick example of a common family situation but I wanted you to realize and really think about these things. The only way for you to determine how much life insurance will be enough for you and your wife and kids is to actually sit down and look at every bill that you pay now the bills that you know will be there in the future, all of the variables that could happen (if these didn't happen there might not be a need for insurance) and then when you think you've got got it figured out add an additional 20% just in case. It's always better to have more than you need than not enough.
If you are the primary support of your family wouldn't you want to know for 100% certain that your family was going to be alright, in the event that something happened to you, no matter what happens? Me too. The only point that I'm trying to bring to your attention is to not let someone else dictate to you how much life insurance you need. Sit down with your wife or husband and then get ahold of a qualified agent. Do it right the first time because, unfortunately, there are no second chances in these life and death circumstances.
Joe Stewart is a Webmaster and former Life And Health Insurance Agent. He's made understanding life insurance simple for consumers. You can read detailed explanations about life insurance at his website TheLifeInsuranceGuys.com or by clicking on Free Life Insurance Quotes