You want to provide life insurance for your family. But how you decide how much life insurance do you need? And how long will you need insurance coverage?
Things to consider......How many $$$ would my family need to complete the plans in our future without me?
Look at your age
Are you married?
Do you have children? How Many?
How long will you be responsible for their care?
Do you have a mortgage on your home? How Long?
What is your net worth?
Some planners suggest a life insurance policy to cover 3 to 5 times your annual salary.Then there is the question... How long a term should you purchase? You could get an answer by considering the items outlined in the bullets above..
Usually “term life” is purchased to replace an income so that if the insured dies others will have funds to maintain a similar lifestyle. 5 year term life insurance is issued for a 5 year term of time. The premium remains the same for the whole 5 years. Why and who would purchase life insurance for such a short period of time? First, let’s look at the purpose of life insurance to properly orient ourselves for the use of 5 year term.
If a contractor with a 5 year project contract on which to perform for another, it could be wise to have a life insurance policy in place on the contractor’s life with the owner of the project the beneficiary. If the contract had not yet been fulfilled and the contractor died, there would be funds to hire another contractor to complete the project.
If one borrows money for a 5 year period, the lender could require that there be a life insurance policy on the life of the borrower with the lender as the owner of the life insurance policy. 5 years would normaly be specific, that is, it is to used to cover other situations that could last for 5 years.
5 year term life insurance is probably not the right fit for a young family with young children just starting out.