How Much Life Insurance Do You Need?

Life insurance is available in many forms and when you're living in Boston, it all depends on your personal situation and whether or not you have a family.  If you are single and have no dependents, then you really probably don't need any life insurance.  There is nobody who depends on you other than you.  If you are young and have a wife and a couple of kids, then you should consider life insurance.  If something were to happen to you that caused your death, then your family would lose a source of income that they depend on.

If your salary is important to supporting your family, especially in the situation of a family where the husband works and the mother stays at home with the children, then it is a good idea to obtain a life insurance policy.  A life insurance policy would ensure your family has a source of income and will be able to pay the bills, pay the mortgage and your children will be able to go to college.  But, when you're in this situation it's hard to determine how much life insurance coverage you need.

In life insurance it can be difficult to put a rule of thumb on coverage.  This is because everybody lives a different lifestyle and has different financial requirements.  It also depends on several factors such as you debt, how many dependents you have and if you have other sources of income.  However, the general guideline is that you should obtain coverage that is five to ten times more than you annual salary.  So, if you are a middle class, healthy family living in Boston and you make about $65,000 a year, then you would want to obtain somewhere between $325,000 to $650,000 in life insurance coverage.

Now, all you have to determine is what type of policy you need.  You generally have two choices, term life insurance and whole life insurance. Out of the two, term life insurance is going to be less expensive.  In the event that you die, the term life insurance coverage will pay a death benefit, but not a cash value.  Most employers offer term life insurance. Whole life insurance provides both a cash value and a death benefit.  This type of life insurance is generally much more expensive.  

The same middle class family who lives in Boston could expect to pay about $350 a year for their term life insurance policy with $350,000 in coverage, which comes out to about $25 a month.  If they were to select whole life insurance, they could expect to pay about $3,500 a year or about $300 a month. As you can see, the type of life insurance policy you select and how much you want to spend can make a large determining factor in the coverage of life insurance you require.

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