How much Life Insurance do you Need?
Thu, 04/30/2009 - 13:36 | 
ralph
Almost nobody has as much life insurance as they think they have or as much life insurance as they should have.
Many people insure their lives for $190,000 because it sounds like a lot of money - and it is. But is it enough for surviving dependants to live off? Can it pay off all your mortgages, loans and credit cards and still leave an amount big enough to generate an income?
People hugely miscalculate the rate at which a family can get an income from a lump sum arising from a life insurance policy. Once upon a time the rule was 10 percent. At current levels, without risking the capital, the $190,000 may pay a maximum income of less than $3,000. And this amount keeps dropping. The current financial chaos is affecting all levels of life insurance.
To calculate the amount of life insurance cover you need, a budgeting exercise should be done to show the amount of money a household requires to maintain its standard of living for a year.
All life insurance calculations should be checked regularly because of the speed at which things are changing. Life insurance amounts decided on a year ago are now vastly different.