The purpose of life insurance is to provide funds to satisfy a need for your heirs if something unexpected happened to you. How long could your family continue without you. If you are the primary breadwinner and were to die tomorrow, is your spouse capable of replacing your income? And even if your spouse can replace your income by returning to work, would they be able to keep the family home? Would they be able to afford the added expenses of childcare? And, will they be able to continue with other plans such as retirement funding or college finding? For high net worth individuals, how will their heirs pay the taxes on their estate at death? Life insurance simply provides a means to purchase protection against the possibility of an unexpected loss.
The question, however, is how much is enough, and what type of insurance do I need? To answer this question you need to ask yourself “what is it I want to protect if I am not here to provide for my family as the result of my death?” Once we have determined the extent of the protection you want to provide for your family, then we need to determine which type of insurance should you own and/or which type of insurance can you afford. While there is no simple answer to these questions, a good financial planner or insurance professional can provide invaluable assistance in formulating a plan to meet your short term and long term needs. To help you sort through some of this it is also helpful to understand what types of insurance are available.