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Term Life Insurance - How Much Coverage is Enough?

By Compuquotes Team on March 5th, 2009

The whole idea behind any kind of life insurance is to provide money for your family if they lose you and your income. In most cases, term life insurance is a better option that whole life. Most whole life policies have some kind of savings attached to them and slowly build up a cash value over the years. The bad things about these kinds of policies is that the monthly premiums are much higher than term policy premiums and, since some of the money goes toward this cash value, they are often have less total coverage than a term policy. In this author's opinion, term insurance is the best bet for most people. You can often make more money on your own by investing the difference between term premiums and whole life premiums than the insurance company can.

Now that that has been established, the question becomes �How much insurance do I need?� You might try a life insurance calculator which will let you put in a few numbers and then provide an estimate of you how much insurance you might need. You always need to be careful when the company who wants to sell you a policy is telling you how much you need. You need to have a good idea of what you need before you start talking to an insurance agent or plugging numbers into a calculator. This will help you decide if the company you are looking at is trustworthy. If the agent's or calculator's numbers are a lot different than yours, take a look at why. Most agents are going to be honest people and should be able to give you very valid explanations for the numbers they come up with.

So, what kinds of things are you going to look at to come up with a number for coverage? Your current income and lifestyle are two important factors. Figure out about how much money your family would need to maintain their current lifestyle until your kids can start earning their own way. You need to consider, too, what bills you may want them to be able to pay off. Paying off the mortgage and car loans will help them meet basic necessities. Take into consideration any future expenses like education. If your kids are going to college, do you want to provide them with enough to pay for the entire thing or just enough to give them a good start? If you live in a two parent household, how much will the other person be able to contribute to the income?

Now that you have put together some basic information and come up with some idea of what you need, it's time to talk to a professional. As mentioned above, a professional agent is going to be able to come up with numbers and reasons for those numbers. It's wasteful to pay premiums on too much insurance and unfortunate to not have enough insurance to cover your family's expenses if you pass.

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