I decided to bite the bullet and up my life insurance coverage amount for the family.  I increased the amount by $300,000 more than my current coverage ($200,000).

So now, I’m covered for $500,000 if I die.  While that doesn’t sounds like a lot… in our case it is.  With the Social Security death benefits, my wife should do just fine, and my kids will still be able to go to college (or at least they’ll have enough for the first 3 years, if I were to die now or next year).

A smarter approach on my part would have been to have this level of coverage all along.  Now that this is in process, I feel a little better now.  The only problem with the new coverage amount that I now  have, is that the coverage is through my employer.  I’m not sure what would happen if I were to get laid off (or worse fired).  That’s why I am considering purchasing additional coverage separate from work.  I will earmark these funds separately too, perhaps putting the money in a bond or a safe dividend paying stock (or even a mutual fund or etf…).

What type of extra insurance am I considering?   Since I’m late to the party, I’m looking at 20 year term life insurance (If I was starting new, then 30 year).  Since this is extra security above the amount what I currently have with my employer, I’m going to look for bargain amounts (but at least $150,000).

What should I have done when I started my family?  If I were to start again, I’d buy a 30 year life insurance term right out of the gate.  I’d also make sure the coverage amount is at least $500,000.  If I was just starting a family in 2010, I’d probably go for the $750,000 to $1,250,000 range depending on how much the monthly cost would be.  Actually, I would most likely go for the $1,000,000 amount.  The thing is if you go too low and a mishap occurs and you need it years later, inflation might take a decent size bite out of the amount your family receives.

I can’t stress how important this coverage is.  I’m kind of surprised I was weak on this (to me, at the time, 200,000 seemed like a lot of money), but it’s not!  I also underestimated my chances of death.  But even if you are in excellent shape, that doesn’t prevent accidents from happening to you! 

If you have or are starting a family, please go the extra mile on this one, don’t be naive like I was!