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Life Insurance Today

How Much Life Insurance You Need

When you get some life insurance, choosing your coverage amount is an important decision. Use our guide to determine how much life insurance you need.

Things to Consider

Although there is no universal rule to determine the amount of life insurance coverage you need, a common guideline is to take out a policy that is seven times your salary. Unfortunately, the average person has a policy that is only about three times his/her annual income. Insufficient coverage might leave your family saddled with debts in the event of your death. Here are some things to consider when you get some life insurance:

  • How much debt would you leave to your family?
  • What recurring expenses will your family face?
  • How much will your final expenses be (funeral, medical, estate taxes, etc.)?
  • Will your family be able to maintain their lifestyle over time?
  • How much will it cost to put your children through college?
  • Will your spouse need supplemental income for retirement?
  • What long-term goals does your family have?
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Analyze Your Needs

If you would like a more exact assessment of how much coverage you need when you get some life insurance, perform a needs analysis. This involves:

  • Putting together financial records to determine your history
  • Computing your family's investments and savings
  • Taking an inventory of each member of your family and his/her long term goals
  • Asking how your family would sustain their present standard of living if you die
  • Estimating how much it will take to meet your family's financial needs in the present and the future (also take inflation into account)