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Money Q&A: Increasing Your Life Insurance Policy

Q.

We are thinking of increasing our life insurance policy. How much should it be worth?

A.

A simple 15-30 year term life insurance policy that's equal to the amount of your outstanding mortgage is sufficient. However, you may want a policy that generates enough money in interest to make up for lost wages. Here's a simple formula to follow: Say you earn $50,000 a year. Many safe investments pay out 5.25 percent interest. So, to earn $50,000 a year at 5 percent interest, you'd be looking at getting a $1 million policy.

-- The Nest Editors

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