People typically buy life insurance so that surviving loved ones can pay final expenses (funeral, medical bills, taxes, etc.), outstanding debt (mortgage, car loan, student loan, credit card, etc.), future obligations (college, retirement, etc.), or maintain the same standard of living.
Some individuals choose the amount of life insurance based on annual income, and then multiply it by five, ten, etc.
Other folks choose a life insurance figure in line with lifetime income. This involves predicting total earnings based on normal life expectancy.
A third, and more precise approach considers survivors' current and future financial needs. Calculate likely expenditures (normal living costs, housing, child-rearing and education expenses, credit card and loan debt, transportation, taxers, etc.). Subtract resources that can be tapped to offset these costs (bank accounts, investments, retirement plans, insurance payouts, income-producing assets, etc.). The final figure is the amount of life insurance that is necessary.
Companies offer a variety of life insurance products. Ask a licensed insurance agent to help you explore the options, discuss pros and cons, and provide pricing information. Consider several alternatives before committing to a policy. In addition, verify the insurer's financial stability, licensing status, and complaint record. Insurers not licensed to operate in Illinois are not subject to state insurance laws.
It is important to periodically review life insurance coverage limits to confirm adequate protection is in place. This is especially true after major life events like getting married or divorced, the birth or adoption of a child, buying a house, etc.
Finally, make loved ones aware that you have life insurance coverage, and leave a trail so they know where to find the policies upon your death.