Do You Need Life Insurance?

Whether you need life insurance, and how much you should buy, depends on a number of factors. Here’s what to consider:

Who needs your income? Life insurance is generally designed to replace your paycheck should you die. If you have minor children, or your spouse couldn’t cover the mortgage or pay for child care if you died, you probably need some coverage. Some people also buy insurance to pay estate taxes so more money can pass to their heirs.

How much coverage do you need? The usual--and grossly oversimplified--rule of thumb is five to eight times your income. But you’d be smart to review your actual financial situation so you don’t buy too little or too much. You can find worksheets and articles at www.latimes.com/money and calculators at www.insure.com.

How much coverage can you afford? Term policies are much cheaper than cash-value policies that have an investment component. Insurance experts say you should make sure you can buy enough coverage before you consider a cash-value policy. You can get quotes for term policies at several Web sites, including www.quotesmith.com or www.insweb.com. A chat with an insurance agent can give you some idea of what cash-value policies will cost.

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Liz Pulliam Weston