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How Much Life Insurance Do I Need?

Apr 29, 2013

Figuring out how much life insurance to buy is a puzzle to almost everyone looking for coverage. The answer may seem complicated because everyone is different and everyone’s financial and family needs are complex. But life insurance is a product that was designed to work for all people, no matter what their needs may be.

Life insurance is a flexible product, meaning that each person chooses only what she needs.  It is certainly possible to be over- or under-insured, but there are a few simple questions you can answer that will help you find the right amount of affordable coverage you need.


1. Consider is your dependents:

      • How many years will it be before they are independent?

• How much does it cost to retain their standard of living for a year?


2. You family’s financial needs may seem impossible to calculate, but there are just a few easy factors to consider.  First of all think about the basic necessities like food and clothing, and calculate approximately how much you spend a year.  Then look at bills: tuition, utilities, and rent or mortgage payments, and other expenses of that nature.  Add those together and you will calculate a large chunk of your annual expenses.


3. Loans.  The sum of your student loans, car loans, credit card debt, and mortgages should all be covered in your life insurance policy. This can add up to a sizable amount, and you certainly would want coverage that takes care of these payment for your dependents.


4. Future expenses.  For example, if you have children, do you want to provide a college fund for them, or perhaps set some money aside for a wedding?  It may be difficult to think about events that seem to be so far in the future. However, bear in mind that college tuition and weddings are big expenses and most children at least partly depend on their parents for help with these major life events.


5. Safety net. Unforeseen events can often occur, such as illness, auto repairs and big-ticket home maintenance, such as heating or air conditioning unit replacement.  So some emergency funds could easily come in handy.


There is no exact and universal formula for figuring out just how much life insurance you need, but the guidelines listed above will help find a general number that will keep your dependents protected and financially secure.

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