Death of a Parent
Despite our best intentions, none of us gets out of here alive. If you're a parent, your death or the death of your co-parent could be financially devastating for your children. Life insurance, which pays out to your family or beneficiaries in the event of your death, can help ease your burden. Estimates for how much insurance you need range from 10 times your annual salary to just enough to bury you. For a realistic estimate, consider the expenses your family has and what it would take to maintain its lifestyle.
How much will your funeral expenses be? In the U.S. in 2012, the average cost of a funeral was between $7,000 and $8,000 [source: Funeral]. Cremation is a less expensive option, but can still run several thousand dollars. A third alternative is to donate your body to a medical school after your death. Check with colleges and universities in your area for their policies on accepting body donations.
How many years will your family need your replacement income? Does your spouse work outside the home? Are your kids grown and gone, or are they toddlers with a lifetime of needs ahead of them? Do you need to factor in college, weddings or the additional expenses of a special-needs child?
Life insurance need not be a one-time purchase. As your family's needs change, you may need to increase or decrease your life insurance.