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5 tips to buying the right amount of life insurance

By Maryalene LaPonsie on June 27th, 2012

According to Genworth Financial, many Americans could probably use more life insurance coverage. The company's 2012 LifeJacket Study found a significant gap between how much coverage individuals carry and how much they actually need.

To keep your family protected in the event of a tragedy, here are five tips to help you figure out if you need more life insurance.

  1. Calculate your debt: Traditionally, individuals have been advised to purchase life insurance based upon their current income -- for example, seven to 10 times their annual pay. However, this may not always be enough. Instead, calculate your debt and determine if your spouse can comfortably continue payments after you are gone. If not, it may be wise to buy additional life insurance that can be used to pay off the debt.
  2. Consider future costs: Don't forget about major expenses that may loom in your family's future. Do you have kids heading to college? Would your spouse want to relocate in retirement? Having life insurance coverage for these items can reduce financial stress and create peace of mind for your family for years to come.
  3. Determine an inheritance: Consider what you would want to leave your children, family or favorite charity as an inheritance or bequest. An affordable life insurance policy is a convenient way to leave a final gift to the ones you love.
  4. Re-evaluate your needs at each life stage: The need for life insurance changes at every stage of life. Take a few minutes to recalculate your needs at each of these life events, such as marriage, birth of a child, divorce and retirement. These are also good times to update beneficiary information as needed.
  5. 5. Compare life insurance quotes for various plans: If you currently have a whole life policy, you may not think you can afford any more coverage. While whole life can be a good investment, premiums are generally higher. If you can use extra coverage, you may be surprised to see how inexpensively you can purchase term life. Compare life insurance rates for several policy types and don't be afraid to mix and match policies to get the coverage you need at a price that fits your budget.

Maryalene LaPonsie
Maryalene LaPonsie has been writing professionally for more than a decade on topics including education, insurance and personal finance. She holds a Bachelor's Degree in Political Science from Western Michigan University.

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