There really isn’t a simple answer. Generally if you asked several different insurance professionals, you are likely to get many different answers. However, in my opinion the amount of insurance actually depends on your individual situation, your personal goals and needs.
Some things to consider when determining how much life insurance you need are:
- How much total debt do you currently have including your mortgage, car loans, credit cards, other loans? Do you add to your debt each month?
- How much do you spend each month on things other than your debt?
- Generally one of the biggest factors to consider is that you should have at least enough coverage to replace your existing income for your survivors.
- Do you have children that will need funds to go to college? If so, how many children and how much per child? You may want to plan additional funds for educational expenses.
- Add enough in your planning for final expenses such as funeral, burial, and related expenses.
- Add additional funds in your planning for unknown future emergency expenses.
- Keep inflation in mind when planning. (Because today’s dollars won’t buy the same in the future!)
You really can’t protect your family correctly if you don’t know how much they will need each month to survive. (In at least the manner they are accustomed to living.) One of the key factors to consider is what kind of lifestyle you want your survivors to have if you pass away. You shouldn’t just guess at a number! If you pick an amount out of your hat, such as $500,000 or even $1,000,000, that may seem like a lot. You may think that is sufficient coverage, since that is a lot of money. However after careful thought, considering inflation and other factors, you may find that is not enough! Calculating how much income your survivors need if you aren’t around is the only thing that truly matters!
There are other general methods and formulas such as buying coverage that is equal to 8 to 10 times your annual income. But in my opinion, those methods are inadequate shortcuts. Life insurance is a personal affair and should be customized to your individual needs and goals. There are also online calculators that can help you figure out how much coverage you need.
If all this seems complicated, one of many licensed independent life insurance agents can help by sitting down with you, getting a fact finder worksheet completed with your personal information, and help you calculate your the recommended amount of life insurance that you should purchase, customized for your individual situation. At that point it is up to you to decide how much you can afford and are willing to purchase. If I can be of assistance, please call me at 941-404-5334 to set up an appointment or click here to contact me by email.
Note: Life Insurance information can be confusing to many people. As an "independent licensed agent" I can explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose a life insurance policy, from many choices of different insurance companies, that you feel fits your needs. Plus if you choose to work with me you will have personalized service by a local agent that can shop premium quotes for you. If you would like my assistance to discuss and/or start the process of getting you insured please call me at 941-404-5334.
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