How Much Life Insurance Is Enough?

Take a moment to imagine exactly what would happen if your household suddenly had to adapt to life minus a primary wage earner. With 69 percent of American families owning life insurance, many people may believe that they are prepared for this eventuality.¹

One study found that the average life insurance need is $459,000, whereas the average amount of life insurance owned is only $126,000. This results in an average $333,000 shortfall.²

There is no one-size-fits-all way to estimate your life insurance needs. Calculating what your family's actual income requirements would be in the event that you or your spouse died prematurely might be a way to help determine how much coverage is appropriate.

Home: Among the important considerations is whether to pay off the mortgage on the family residence. Owning a home free and clear may help provide an added measure of security for surviving family members, but it also means that the death benefit would need to be at least as large as the outstanding mortgage balance.³

Education: Sending kids to college is an ambitious goal even for two-income families. If the surviving spouse has to struggle to afford education costs, the students may be forced to attend a less-expensive school, or work longer hours to help bear the cost. Factoring projected college costs into life insurance coverage could help remove some uncertainty.

Retirement: If one spouse dies with inadequate life insurance coverage, the surviving spouse's retirement could be at risk. The survivor could be forced to dip into retirement savings to cover major expenses, or reduce retirement contributions because of the need for more take-home pay. A sufficient amount of life insurance could help ensure
that the survivor's retirement lifestyle is not negatively affected.

Don't be lulled into a false sense of security just because your household owns life insurance. The appropriate amount of insurance coverage can be known only after a thorough examination of your family's personal situation and goals.

1) American Council of Life Insurers, 2004
2) Insurance Marketing, October/November 2004
3) The cost and availability of life insurance depend on such factors as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

Send email to webmaster@annuityadvantage.com with questions or comments about this web site.
Copyright © 2001-2010 AnnuityAdvantage.com

Alternate Home Page Index Annuities Annuity Fixed Annuities Annuity Quotes Annuity Rates 1035 Exchange 1035 Exchanges Annuities Broker Annuity Broker Annuity Brokers Annuity Calculator Annuity Calculators Annuity Quote Annuity Rate Deferred Annuities Deferred Annuity Equity Index Annuities Equity Index Annuity Equity Indexed Annuities Equity Indexed Annuity Fixed Annuity Fixed Annuity Rate Fixed Annuity Rates Fixed Rate Annuities Fixed Rate Annuity Immediate Annuities Immediate Annuity Index Annuities Index Annuity Indexed Annuities Indexed Annuity Life Annuities Life Annuity Retirement Annuities Retirement Annuity Tax Deferred Annuities Tax Deferred Annuity Tax Sheltered Annuities Tax Sheltered Annuity