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Life insurance is a crucial step in planning for your future and your family's future. It can fulfill promises and obligations to your family if you are no longer living.

The death benefit is income-tax free and can be used to cover funeral expenses, repay debt, provide education, pay estate taxes or any other expenses your survivors may incur.

Life insurance may also be used to help ensure that a family business will pass to your intended survivor. There are also benefits to certain types of life insurance plans during your lifetime.

How much life insurance should an individual own?

Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.

Important factors include:

  • -Income sources (and amounts) other than salary/earnings
  • -Whether or not the individual is married and, if so, what is the spouse's earning capacity
  • -The number of individuals who are financially dependent on the insured
  • -The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan
  • -Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.
  • -It is recommended that a person's insurance advisor be contacted for a precise calculation of how much life insurance is needed.

In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death.