Determining Life Insurance Needs

by David Jenyns on June 23, 2008

A standard expression among investment advisors is, “A man should have adequate life insurance.” Assuming that a man’s dependents will need considerable financial help if he should die soon, how much life insurance should he have? Between ages two and 32 it is less than one in 500; at age 40 about one in 250; at age 50, one in 100; at age 60, one in 40; at age 70, one in 20.

Women’s mortality rates are lower than men’s of the same age. Looking on life insurance as a temporary substitute for principal a man intends to acquire, what is a sensible relation between the amount of life insurance and his program for accumulating principal? Remembering that, in middle age and later, the cost of maintaining life insurance is high enough to interfere seriously with saving from salary.

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