How long do you need life insurance coverage?

Once you’ve decided to buy a life insurance policy the next step is to determine how long you’ll need the life insurance to replace your income. General thought is that you should only need life insurance until either your dependents are out of the house or your retirement savings kicks in. This amount is often called the face value or death benefit of a life insurance policy.

For example, if you are 45 years old and still have a 16 year old child living at home you would want your insurance policy to last either 20 more years until your retirement or between 2 and 7 years until your child was self-sufficient financially. To calculate this number you would take your annual income and multiply it be either the 20 years or the 2 – 7 years. Once you reach retirement however, your retirement pay should kick in and replace many of your life insurance needs.

One the other hand, if you yourself are 28 years old with no dependents and no debt you may need a minimum amount of life insurance to simply cover the cost of an untimely death. These costs would include the estimated price of funeral and final expenses as well as any mortgage or other debts you currently have.

Another way to decide how long you need life insurance coverage is to use your mortgage term. You can choose a policy that will be in place for the length of your mortgage loan. You can also use this method for non-mortgage debt such as credit cards or other loans. Once these things have been paid off, or after a set number of years, you might want to consider reducing the level of cover you have to suit your changing financial situation.

Ultimately, you will know your situation’s life insurance needs best. But, if you have any questions don’t hesitate to ask a life insurance agency. They deal with many different situations all of the time and should be able to help you find the answers that you are looking for.