QUESTION: Amanda on Facebook wants to know if you purchase term life insurance based on current income or a projected salary.
ANSWER: That depends on what the potential is based on. If it’s virtually guaranteed to go up next year, then you could buy a little bit of potential. But if you just think you’re going to make a lot more in the future, then no. You’d buy it based on what you’re making now because that’s what your family is eating on.
They would need to have about 10 to 12 times that amount to take care of them if something happened to you. But if you make $35,000 a year and you are in residency because you are finishing up your medical degree, then next year you might go from $35,000 to $135,000. In that case, you might want to buy more because that’s pretty much a sure thing as to what is going to happen in your world. That’s another way of looking at it.