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ASK KIM
Life Insurance Should Fill the Gaps
by Kimberly Lankford

I'm 40 years old, earn $50,000 and have three children. How much life insurance do I need?

As much as you need to cover your family's needs if you are no longer around to bring home that $50K.

Do you want your three kids to go to college? Could your spouse make the house payment on one income? Will he or she have enough in savings to live a comfortable retirement?

You'll get the most accurate answer if you estimate your family's future expenses after you die, then subtract income they'll receive from investments, social security, jobs or other sources such as an employer's group coverage. Your personal life policy should fill in the gaps.

It's best to have a financial planner or trusted insurance agent help you calculate the amount. Or you can get a rough estimate by plugging your numbers into our life insurance calculator.

A quick rule of thumb: buy coverage that equals six to ten times your annual income. That calculation won't be nearly as precise -- two people earning the same income may have very different needs -- but it can help you get started. If you're supporting a big family and an expensive mortgage, then you should lean toward the higher figure. If you have a working spouse and less expensive house, then you may be safe with the lower end of the range. But it never hurts to round up if you can afford it.

Stay-at-home parents need life insurance, too. To calculate the amount, consider how much it would cost to pay for someone else to take care of the house and the children.

An equally important question: How long will you need life insurance? If your kids are in grade school, you have a 30-year mortgage and are actively investing for retirement, a 20-year term policy should be adequate. You can buy longer or shorter terms based on your specific needs. Shop around, especially now that life insurance rates are so low.

It's also a good idea to reassess your life insurance needs every few years as your expenses change. For more information, see How Much Do You Need? in our life insurance planning center. Our Surf for Life Insurance article also lists several good Web sites for gathering life insurance price quotes.