Determining your coverage need
Once you understand the different types of life insurance, it's time to figure out how much coverage to get.
First, understand how the type of life insurance you choose depends on your coverage needs
There are 2 types of life insurance (term and permanent) as well as several subcategories. If your insurance need is for your lifetime, then permanent insurance, such as universal life insurance may be an appropriate solution. If your insurance need is a safety net for a period of time, to help provide protection for loved ones in the event of your unexpected passing, then term life insurance may be right for you. The most important part to know in terms of coverage needs is the difference between term and permanent life insurance.
Term life insurance:
- Covers you for an amount of time you choose
- Policy amount is paid to your beneficiaries, generally income tax free
- Can be helpful for the loss of income
Permanent life insurance (whole and universal):
- Generally covers you for your entire life
- Policy amount is paid to your beneficiaries, generally income tax free
- Can be helpful for loss of income or transferring wealth to your heirs
Next, calculate how much coverage you may need
The amount of coverage you get should reflect how much money you'd like your beneficiaries to receive in the event you pass away unexpectedly.
First, calculate your household's day-to-day needs—the entire amount of money it takes to run your household each month. One simple guideline is to aim for 10 to 12 times your annual salary and bonus. 
Next, plan for larger expenses such as college tuition, paying off student loans, a mortgage, other debts, or running a business.
If you have a spouse/partner, it's also important to have coverage for both people, no matter how much each person earns. You might need to cover costs such as additional caretaking of children or time off to settle the estate.
Finally, review your overall financial plan
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.
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