How Much Life Insurance Do I Need?

We encourage people to view life insurance as an income replacement plan that will allow their loved ones to remain financially secure in the event of their unexpected death.

When viewed this way, an effective and simple method to calculate an appropriate amount of life insurance for your situation is to simply determine how much annual income you want to replace and for how long. Once you have come up with those numbers, it becomes an easy math calculation to come up with how much of a life insurance benefit you need.

As an example, if you wanted to make sure your loved ones had at least $100,000 a year for 10 years you can quickly determine that you want to get a total of $1,000,000 of life insurance. Or, if you had a baby or young children (or anticipated children in the near future) and wanted 20 years of income of $100,000 then you should get a $2,000,000 policy.

Of course, this amount doesn’t necessarily need to match your current annual income. It is important to remember that this insurance benefit would pay out tax-free so the money could go further than an annual salary from employment. Additionally, expenses could be lower as you would no longer be financially supporting yourself. Finally, cost of insurance is always a factor, and when you look at price quotes for various benefit amounts, you may quickly determine how much money you are, and are not, willing or able to spend on life insurance.

Granted, this is a simplified planning technique, and you could certainly factor in college expenses for children, cost of living increases, retirement planning, etc., but we think most people can easily relate to and come up with how much income they want to provide and for how long.

In the end, we believe that when you understand how much income your loved ones will need and for how long, the easier it is to come up with a life insurance benefit amount that will provide both financially security and peace of mind to you and your loved ones.

Click here to use our life insurance needs calculator.