Life
Insurance

Life Insurance
The primary purpose of life insurance is to replace lost family income – income no longer available due to the untimely death of one or both family breadwinners. Life insurance, therefore, should be only on the lives of those who produce income for other dependents. 

How Much Life Insurance is Enough?
One reason for choosing a life insurance policy is to figure out how much your dependents will need after you are gone. To determine the face value (the amount your policy pays if you die) of your life insurance, you should consider the following:
•    Income Replacement: One of the most significant factors for life insurance is income replacement, which will be a major determinant of the size of your policy. If you are the only provider for your dependents and bring in $40,000 a year, you will need a policy payout large enough to replace your income and a little extra to guard against inflation. To replace your income, you will need a $500,000 policy. This is not a set rule but adding your yearly income back into the policy (500,000 + 40,000 = 540,000 in this case) is a reasonably good guard against inflation. Remember, you have to add this $540,000 to whatever your total debts add up to.
•    Future Obligations: If you want to pay for your child's college tuition, you will have to add this to the amount of coverage you want, which would be about another $100,000