Most people are under the assumption that the amount of insurance they can request is an arbitrary figure and that the insurance company will issue whatever has been applied for. In reality, there is a maximum amount of insurance that an insurer will accept, unless there are special circumstances.
The purpose of life insurance is not to make the surviving beneficiary rich, but rather to ensure their standard of living is not negatively impacted as a result of death.
For those below the age of 60, the general rule is a multiple of one's current income, not taking into account potential salary increases, investment growth, inflation and other life changes.
For those over the age of 60, the general rule is have insurance equal to the individual's net worth.
The following information reflects general life insurance guidelines equal to the present value of potential future earnings which would be lost at the death of the insured. |