How Much Life Insurance Do You Need?
Most people have no idea how much life insurance they really need. Since each
person's financial and family situation is different, there are many variables involved. Some of the things
that you will consider when determining the amount of life insurance to buy are:
- Your dependents (spouse, children, parents, etc.)
- Debts such as a mortgage, auto loans, student loans, business
- Assets- how much do you currently have in savings and investments?
- Future financial obligations and goals such as a child's college education
The General Method
A quick and easy way to come up with an amount of life insurance you need is to multiply your annual income by 5
or 10. Five times your annual income is on the lower end, and 10 times your annual income is on the higher end and
will last your family longer.
The Expense Calculation Method
Add up all of the expected expenses that your family would incur if you were to die. Some examples are funeral
expenses, money to pay current debts, mortgage payment, tuition, and replacement income needed for your
The Income Replacement Method
Determine how much of your current annual income your family would need in order to maintain their current
lifestyle. Then determine how many years your income is needed until your spouse retires or until your children
have finished college. For example, if you make $60,000 and your estimate that your family would need 75% of your
income for 10 years, then you need to get about $450,000 worth of life insurance coverage.
These methods should be used as a tool to help you come up with an amount. It's also important to work with an
experienced agent to help you determine what type of insurance is best for you, and which
company has the lowest rates for your particular situation.
Compare Rates for Your Needs Today
The first step when shopping for life insurance is to shop around. Remember that rates can vary by as much as
70%, so it definitely pays to compare multiple rates from several carriers. Get started today and compare rates from several highly rated carriers today.