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A commonly quoted rule-of-thumb is that life insurance should equal at least six times your annual after-tax income. However, the real answer depends on your needs and your unique family, business and financial circumstances.
Most people buy life insurance for the following purposes:
- Ongoing needs for support, as a replacement for the deceased’s paycheck
- Immediate cash needs for such expenses as taxes, debts, burial, and estate settlement costs and taxes
- Future financial needs such as college costs and retirement income
To determine the amount of insurance you should have, it is necessary to list all of your financial needs and then perform the calculations. This is where your professional advisor can be of assistance.
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