|
Some people equate life insurance with tragedy and death. In truth, life insurance is for the living. Without it, the sudden loss of a key breadwinner could leave a family stranded without the resources to maintain their lifestyle - or even retain their home.
There are several different methods for determining the appropriate amount of life insurance for your situation. A full Needs analysis takes the current situation and future goals into account (such as in the calculator on the previous page). A Human Life Value analysis attempts to quantify the financial value an individual has for their family.
Since income replacement is the primary purpose for most life insurance, many people instead just use a multiple of income rather than a full needs calculation. Not so long ago, experts recommended that families carry a life insurance policy with a death benefit of between five and seven times their annual household income. Today, however, in light of higher mortgages and spiraling college costs, most advisors now recommend eight to 10 times income.
Unfortunately, no matter how it’s calculated, most American families are underinsured. According to statistics from consulting firm LIMRA International, the average American household carries just $146,300 in life insurance - almost $300,000 less than they actually need. Only 68% of adult Americans have life insurance coverage and a third of those have only group coverage. 44% of all U.S. households either have no life insurance coverage or acknowledge that they need more than they have. | 
