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What is the right amount of life insurance to get?

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Many people believe that you should buy as much insurance as you can afford, but how much insurance you need really depends on a large number of factors. Insurance companies want to insure your full value, but they are also reluctant to provide coverage that is vastly in excess of your net worth. For instance consider some of the following items:

The cost of a funeral has gone up in recent years and many insurance policies are taken out for the purpose of this alone. But if your net value is greater than $50,000, you probably have other assets that should be protected as well, and you should keep your family in consideration as well, especially all of the things they are subject to lose without your presence in their lives.

If you have dependent children, it is important that you plan for their daily needs after you are gone, but you should also keep an eye on their futures. Term life insurance policies are a great way to plan for a certain need that won't go away if the event of your passing. Term life policies are also good for such things as paying the home mortgage off, or providing your spouse with the funds to go back to their family home.

An advantage of having as much insurance as you can afford to buy is that investing in whole life insurance policies will provide you with your own tax-deferred borrowing base. Whole life insurance policies can be borrowed against, or invested according to the policyholder's wishes, giving them the potential to be either tremendous assets or embarrassingly small investments. It is not recommended to borrow against your life insurance company for frivolous purposes such as a cruise vacation, but building a new addition on the home is an excellent excuse. Having enough insurance for all of your expected needs can make life easier as time goes on.

answered Aug 23, 2010 by anonymous
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