How Much Life Insurance Do I Need?

May 19, 2020

Buying a life insurance policy is a wise decision that would guarantee financial security for families and loved ones. How much life insurance you need can differ on the basis of personal and financial conditions, but essentially, you need enough to offset your salary and cover the costs of your dependents, including future ones. Most people target 10-15 times their profits.

Multiply your income by 10

The "10-time salary" law does not take a comprehensive look at your family's needs, nor does it take into account your investments or current life insurance policies. And there's no allowance for stay-at-home parents.

Both parents should be insured, and this is because the interest of a stay-at-home parent will be substituted if he or she dies. At a bare minimum, the remaining parent will have to pay others to offer services, such as child care, free of charge to the stay-at-home parent.

Buy 10 times your income, plus $100,000 per child for college expenses

Education expenses are an important part of your life insurance estimate if you have children. This calculation adds another dimension to the "10-time income" law, but it also does not take a deep look at all of your family's needs, properties, or any life insurance policy that is already in place.

Term Insurance

Term insurance is available from $20,000 to $10 million. Those in the 30s and 40s most often buy plans that protect between $250,000 and $1 million. Bear in mind that these compensation rates are how many consumers really want to pay, but they don't automatically show how much compensation is optimal.

Follow these steps to find out how much life insurance coverage you need:

  • Tally up your resources (after-tax income, liquid assets)
  • Expenses + debt = financial obligation
  • Financial obligation - liquid assets = coverage gap
  • Coverage gap = how much life insurance you should get