How Much Life Insurance is Enough?

THE MAJORITY OF AMERICANS ARE UNDER INSURED. The following information will give you a basis to follow in determining how much life insurance you need to protect your loved ones. Most professionals believe there are three essential parts of the puzzle:

1) Covering your total debt obligations

2) Providing a lump sum of money to spinoff income to replace the breadwinners income.

3) Factor in children's educational expenses

Of course, other unknown expenses could also be accounted for. The general consensus is that the replacement of the breadwinner's income is the most important. The basic rule of thumb when calculating for the lump sum needed using life insurance is to take an interest rate factor that you are comfortable with and multiply that rate by $100,000. For example:

$100,000 X 4.8% = $4800 in annual interest income.

If your family needed $48,000 of net income you would need $1,000,000 of life insurance coverage.