In More About Term Life Insurance

A million dollars has entered our collective, cultural subconscious as “a lot of money.” It’s the go-to term for when something seems too expensive or when speaking in hyperbole. But, even if we do watch older movies and TV shows and roll our eyes a bit at gangsters scheming for “just” a million dollars, let’s be real–a million dollars is still a lot of money today.


But when it comes to life insurance, is a million dollars too much? How much life insurance do I need, anyway, and for how long?


There are several big factors to consider here before looking at how much money to spend on  your coverage. Term life insurance covers a specified period of time–you can customize the amount, but many choose terms of anywhere from ten to forty years. Why?  We generally recommend  maintaining life insurance to somewhere around age 70 in order to mitigate the risk of loss of your income due to your premature death.  So, if you are in your 20’s or 30’s, you will want to look at a 30-40 year term life insurance policy.  If you are in your 40’s or 50’s, you will look at at a 20-30 year term life insurance policy.  If you are in your 60’s, you should consider a 10-20 year term life insurance policy.  The idea beyond age 70 is to self-insure this risk.  Meaning, you have enough savings in your retirement account to maintain your income stream if you pass away.  


So how much life insurance would you need?


Consider the factors of your age and your annual income to determine if that million is too much or too little. You want to aim for 10x your annual income, so at $60k, a million in fact might be too much for you. But if you’re making $100k or above annually, a million might not be enough coverage. 


I’m sure you’re not that surprised to find out that your life is worth a whole lot to the people who care about you and depend on you financially. You’ve likely already thought about how they’ll want to give you a proper send-off with your funeral. This costs money, of course. The average funeral costs float around $12,000, but those expenses can go way above that depending on the kind of display your family wants to make. 


It’s a mistake to think that the costs stop with your funeral expenses.  While we never want to think about it, our death is potentially a loss for the people who were in your life. And that means not only in the emotional, grieving sense (of course it will be), but also in the financial sense if you let it be.  If you own a home, you’re leaving the remainder of the mortgage on your closest living relative. That very well may be a spouse who can’t cover the cost, your parents who suddenly have to spend retirement funds to manage the new debt, or your children who will cripple their finances to afford it. The same goes for student loan debts, which notoriously neither you nor your relatives will be able to declare bankruptcy for, or any other kind of business debt or obligation that may be floating around. 


If you’re completely debt-free, likely you’ve been working hard! But that means your family will have lost a significant wage for the household. Making that kind of money up takes time–maybe new education or new training in the interim for a spouse. Again, a good rule of thumb is to multiply your salary by 10–if you make $70,000, then you want at least $700,000 of coverage for your family to be comfortable in the interim. Plus, if you have kids, a million-dollar life insurance policy will easily pay for their tuition and help them in the time when they need the most help. 

Finding out how much coverage you can afford, how much you are eligible for, and how much you need is easy. Look to our custom insurance calculator to find out what Low-Cost Life Insurance can offer you.

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