How Much Term Life Insurance Do I Need?


How Much Term Life Insurance Do I Need? Since you tend to get more for your dollar with term life insurance, it can be easier to get a higher death benefit with an affordable policy. That doesn’t mean more coverage is necessary for your circumstances, however. Ultimately, the coverage amount you need will depend on a variety of factors. For example, you’ll want to consider:

  • How long you’ll need coverage
  • Existing debts
  • Cash flow
  • Standard of living
  • Your appetite for risk
  • Family circumstances
  • Existing health conditions
  • Overall goals of the family
  • Number of beneficiaries
  • Potential impact if the family breadwinner dies

You can take one of two approaches for this decision, notes Brock Jolly, a Virginia-based Certified Financial Planner (CFP): needs-analysis or human life value. With needs-analysis, you’d add up your financial expenses from the start date to the year that you estimate you might die. Human life value, on the other hand, looks at the net economic contributions that the policyholder will make to their family and then subtracts taxes and consumption. That way, their family would still have a way to replace the income they provided.

Talking to a financial professional can help you figure out how much coverage makes sense for your circumstances.

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