Life Coverage: How Much Insurance Do I Need?
If you've determined that life insurance coverage is right for you, how much insurance do you really need? Before getting life insurance quotes, find out how to calculate the best life insurance coverage amounts for your unique situation.
Life Insurance Coverage Amounts: Getting Started
If you have a family, a general rule many life insurance experts agree on is that you'll need a policy benefit seven to 10 times your annual salary to protect your dependents. Your situation, however, may cause you to need more or less than this. When figuring out your life insurance needs, here are some important questions to consider:
- Are you and your spouse currently saving for retirement and will your spouse be able to continue saving without your income?
- Do any of your dependents suffer disabilities or chronic health issues? If this is the case, they will need extra financial support over the long term.
- How many years will your family need financial support? The younger your children, the more coverage you'll need to be sure they will be provided for until they reach adulthood.
- What is the amount of income that needs to be replaced if you are gone?
To get a rough idea of your life insurance needs, you can multiply your salary by the number of years you think your family would need this income, or consider an amount that would be sufficient to support your family in the foreseeable future.
Best Life Insurance Amounts: How Much Insurance Is Enough?
To calculate your life insurance needs in a more exact way, you can use a life insurance calculator online, or create your own worksheet, taking into account the annual income needed to support your family, and the number of years they will need it. Be sure to factor in:
- Age (as well as spouse's and children's ages, if applicable)
- Annual income for you and your spouse
- Anticipated college expenses
- Anticipated inflation rate
- Anticipated investment return
- Assets including savings, investments and existing insurance
- Funeral and other final expenses
- Mortgage and other debt obligations
- Spouse's desired retirement age.
Once you've determined the best life insurance coverage amount for your situation, you'll be ready to begin comparing life insurance quotes.