How much life insurance coverage is enough?

The amount of life insurance coverage needed will vary from person to person, depending on a number of different factors.

Some of these factors include:

• The annual income of the policyholder
• The needs of the family members
• The amount of mortgage on the family home
• The future educational costs of the children in the family

One of the biggest concerns of many workers is who will pay their family’s mortgage after their death. Mortgage life insurance is designed to address this concern by paying off the mortgage upon the death of the policyholder. Since the monthly mortgage payment represents the largest single expense for many families, knowing that the house will be paid off can take a real load off their financial worries.

While there is no one right answer, a good rule of thumb is to purchase life insurance equal to 20 to 25 times annual income. A death benefit in this amount will allow those left behind to live off the proceeds with only a small risk that the lump sum will be exhausted too quickly.

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