How much, what kind of life insurance should you have?

Most people with dependents understand the importance of life insurance in their financial plans. Few, however, are methodical or objective in determining the right amount or the right type of life insurance to buy.

Life insurance can provide a much-needed safety net for people who haven’t accumulated lots of assets and whose families depend on their income to survive. The right way to buy life insurance includes a thorough assessment of the following:

  • Income need of the survivors – How much will the family need to pay the bills, including college funding for the children?
  • Income sources for the survivors – Wages, investment earnings, Social Security, and pension plans all need to be weighed;
  • Investments that can be tapped to supplement income;
  • Current cash flow and retirement-savings opportunities that can affect whether term or cash-value life insurance is purchased.

When a breadwinner dies, the last thing his or her sur­viving dependents should have to think about is how they’ll pay the bills. The right amount and right type of life insurance must be in place before it is needed.