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Life Insurance Today

How Much Life Insurance You Need

When you get a policy, choosing your coverage amount is an important decision. Use our guide to determine how much protection you should get.

Things to Consider

Although there is no universal rule to determine the amount of coverage you require, a common guideline is to take out a policy that is seven times your salary. Unfortunately, the average person has a plan 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 purchase coverage:

  • How much debt would you leave to your family?
  • What recurring expenses will your loved ones 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 require supplemental income for retirement?
  • What long-term goals do your loved ones have?
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Analyze Your Situation

If you would like a more exact assessment of how much protection you require 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 loved ones' financial demands in the present and the future (also take inflation into account)