How Much Life Insurance Do I Need?

In today’s economy, many families are struggling to get by. For this reason, they often choose to go without life insurance. This is a major mistake because if something should happen to the breadwinner of the house, it may takes years to dig out from under the financial hole it could potentially leave behind.

If cost is the issue, there is good news; life insurance rates are cheaper than ever. With modern medical advances, life expectancies are at an all-time high. This translates into lower life insurance rates. In addition, to keep costs as low as possible, you can always buy term insurance.

Assuming you want to make sure your family is properly protected, you will want to figure out how much coverage to purchase. To determine this amount, you need to ask yourself a few questions:

1. What will I need for burial expenses? These days, a traditional funeral and burial will run upwards of $10,000. For good measure, it is best to over-estimate a bit and assume you will need $15,000 for this.

2. How many years would you need to replace your income? This answer is usually determined by the number of years until your youngest child is set to graduate high school. This could be anywhere from a few years up to 18 years.

3. What amount of annual income will you need to replace? This would be your annual income minus taxes. In other words, the amount your survivors need to live on each year until they are on their own. This figure will be different for everyone, but make sure you have an amount that will ensure your survivors can maintain a similar standard of living to what they enjoy today.

4. How much will you need to fund your children’s college? If you don’t yet have your kids’ college savings accounts fully funded, you will need to consider this as well. These days, one child may need anywhere from $50,000 to $100,000 or more to attend college.

Now, take your answers to these questions and add 20% for unforeseen expenses such as medical bills, home/auto repairs, future weddings, etc. This should give you a good ‘guestimate’ for the total amount of life insurance you need. For a more precise figure, it is always best to go over everything with a qualified life insurance professional.

To learn more about how we can help you plan and identify the amount of life insurance needed, please contact us or call us at (301) 681-7550