How much life insurance do I need?
The amount of life insurance you need is unique to your situation and subject to change over time. “How much life insurance do I need?” could easily be translated to “how much will my family or loved ones need to be secure if something happens to me?” The answer to how big of a policy you need, or how much your life insurance should pay out in the end, lies in the number that will allow your loved ones to be financially secure.
There are many “rules of thumb” and formulas that people use to come up with the amount of life insurance they need. Some are as simple as having a policy that is worth 7-10 times your salary, while others are more complex. To keep it simple, but not too simple, answer these basic questions to help you start to identify your needs:
- Do I have people who rely on my income? How many?
- How much debt do I have?
- What are my family’s monthly living expenses?
- Are there any ongoing expenses, like college education or special care that you need to pay for?
Once you have these answers, you can multiply the amount of living and family expenses by the number of years you want the money to last. This will help you start to get a picture of what your policy should be worth to continue supporting your family.
To make it easier, there are many online life insurance calculators that ask you questions about your lifestyle and family and help come up with the number for you.
Once you answer the question for yourself of “how much life insurance do I need?” there are a few more steps to take. There are many different types of life insurance policies to choose from, each with their own advantages. To start comparing your options, read up on the different types of policies and get free quotes online from reputable companies.
Life insurance can be complicated, but it doesn’t have to be. Arm yourself with knowledge of life insurance basics to see if coverage is something that you may be interested in.
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