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Determining Your Coverage Need

If you understand the general types of life insurance, the next step is to think about your own life insurance needs.

Choosing between term and permanent coverage

Identifying the appropriate type of insurance—term or permanent—is the first consideration in choosing coverage. If your insurance need is for your lifetime, then whole* or universal life insurance may be an appropriate solution. If your insurance need is primarily for a specific period of time, such as your working years, then term life insurance may be an appropriate solution. It is important to choose a coverage period that will meet your life insurance needs to ensure that the people important to you are protected.

Choosing coverage amount

In addition to your coverage period, the coverage amount is another important consideration. The coverage amount is how much will be paid to your beneficiaries if you (the insured) pass away. Your coverage amount will depend on the need you are trying to meet, but these are some general factors to consider:

  • Your potential income
  • Your assets
  • Your liabilities (such as debts)
  • Any existing insurance (individually owned or through work)
  • Other costs your family is expected to face

Determining coverage amount and duration by life event

Major events in your life can be good opportunities to make your initial life insurance purchase or review your current coverage.

Use the table below to help determine your coverage amount and coverage period according to the milestones you have reached or that you will in the near future.

Consider life insurance when you Consider an amount that covers Consider a coverage period equal to
Get married Income and home expenses Any duration
Buy or improve a home Mortgage and/or home equity loan (Typically, insurance is purchased to pay off the principal amount of the loans but not future interest.) The term of your loan
Have a family to support Family income needs and new debts The time when you expect you will no longer have dependents
Change jobs Potential income based on your new salary and any gaps in insurance provided by your new employer The length of time you expect to need to earn income
Start a business Expected revenue, debts and future expenses, and maintenance of the general business structure Lifetime or the length of time you anticipate owning the business
Plan a child's college education Future college expenses The anticipated graduation date of the child
Plan your estate Funeral and estate expenses, including estate tax, wealth transfer Your lifetime

It is also recommended that you review your life insurance coverage during the routine update of your overall financial plan.

When buying life insurance, there’s no substitute for a thorough analysis of your personal situation. Fidelity can help you determine an adequate level of life insurance protection.

If you’ve decided on term coverage to replace your potential income, you can also use our Term Life Insurance Needs Estimator to determine an approximate coverage amount.

Next step

Term Life Insurance
Learn about term coverage offered by Fidelity.

Universal Life Insurance
Learn about universal life insurance offered through Fidelity.

*Fidelity currently does not offer whole life insurance.
Estate taxes may apply to insurance proceeds. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Always consult with an attorney or tax professional regarding your specific legal or tax situation.
Fidelity insurance products are issued by Fidelity Investments Life Insurance Company (FILI), 100 Salem Street, Smithfield, RI 02917, and in New York, by Empire Fidelity Investments Life Insurance Company,® New York, N.Y. FILI is licensed in all states except New York. Other insurance products available at Fidelity are issued by third party insurance companies, which are not affiliated with any Fidelity Investments company. A contract's financial guarantees are subject to the claims-paying ability of the issuing insurance company.
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