Your life, your coverage: Understanding how much life insurance you may need

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Over the years, our needs and priorities naturally shift as our lives evolve. When we are younger, we may be more carefree, with fewer responsibilities and a love for fast cars and smaller homes. As we grow, our families and responsibilities grow with us. This changes our perspective and we often trade in our fast cars for a more practical vehicle and move into a house that will become a home for our growing families. And as we become even more wise and experienced, we shift yet again as empty nesters with new interests and different priorities.

These changes are reflective of the natural stages of life — and just as our needs for cars and houses change with time, so do our needs for life insurance. When buying a new car or house we can easily count how many seats or bedrooms we need, but our needs are not always as clear when it comes to life insurance.

Getting the right amount of life insurance coverage is one of the most important decisions you can make, and seven times’ your annual salary is a guideline to consider. But this formula serves only as a base and should be paired with many other financial considerations.

Consider the following scenarios — which are just a few of many life stages that can impact your needs over time — and the amount of coverage that can fit into each situation. 

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Many priorities to protect

An adult with a growing family might consider a coverage amount that helps to protect many financial priorities for a set period of time. The coverage will be there to help ensure the family maintains their standard of living, stays in the home they love, and can pay for the children’s education expenses.

RELATED: How life insurance fits as part of your financial plan

Exploring a legacy

A retiree who is getting their affairs in order and thinking about leaving an inheritance to their grandchildren, alma mater, or favorite charity might consider a flexible permanent policy with a wider coverage range. The coverage amount from this type of policy can help to supplement retirement funds as needed, and later provide a memorable legacy to the policy beneficiaries.

Simple coverage needs

When seeking a source of reliable funds to take care of smaller costs, such as final expenses, one can consider a simple, permanent product with a modest coverage amount. This coverage is specifically designed to pay for costs of a burial and help the family move their lives forward.

Throughout your life, consider how these types of changes might impact your needs for life insurance coverage. 

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