How do I know if I have enough life insurance?

The amount of life insurance that you need will vary throughout your life.  I recommend that clients with children, especially young children, carry more because there are extra expenses in that time of your life.  When you are retired and your home is paid for you don’t necessarily any more than what it would take to cover your funeral and any outstanding debts you might have.  Also keep in mind that your needs will change as you age so make sure you re-evaluate your policies every few years.

Ideally if you die young, your life insurance policy would be used by your family to pay off your immediate bills, like the funeral and medical expenses, and the rest would be invested so that it could provide a steady source of income for your family.  I do not recommend paying the mortgage off early as that can actually lower the credit score of the surviving spouse.

Once you arrive at the dollar amount you need there are several types of life insurance polices to pick from.  Whenever possible I recommend that my clients purchase a permanent policy, for at least part of their coverage, that builds cash value that could be borrowed against in an emergency.  While children are young and a higher dollar amount is needed it is often a good idea to look at term products.  Because the coverage ends after a set time it is often a more economical way to obtain a larger amount of coverage.

Once you have received your policy make sure the policy number, carrier, and agent information is somewhere people can find it when it is needed.  It makes a lot of my clients laugh but I often recommend keeping it in the freezer.  It would be fairly well protected from fire or water damage and in the event something happens to you the kitchen is one area of the house that would be in constant use so the policy information would be seen quickly.