Determining How Much Life Insurance You Need

The amount of life insurance that you need depends on how much money your beneficiary would need if you should die. If you are the sole breadwinner of your household and if you have small children, you will want to have a higher amount of life insurance than if your children are grown and both you and your spouse have well-paying jobs.

Before you decide which life insurance company to go with or even before you determine whether you want to purchase a whole-life or term policy, you should first determine how much money your beneficiary will need upon your death.

Determining Salary

Take a look at your salary first, when determining how much life insurance you need for your beneficiary. A good rule of thumb is that you should obtain a life insurance policy worth 10 times the amount of your salary. If you earn $30,000 each year, you should obtain a life insurance policy for $300,000.

The goal with a life insurance policy is to make sure your spouse and children have enough money to survive as if you were still around earning the money. By purchasing a life insurance policy worth 10 times your annual salary, you are securing your family for years to come while your spouse attempts to get back on his or her feet following your death. This also allows your family to continue with the same quality of life they are used to upon your death.

Ages Of Your Children

You should also take a look at the ages of your children when you consider how much life insurance to purchase for your family. The younger the children you have are, the more money you will need to support your family in the future. If your children are older, your family may not need as much if you should die.

One thing to consider is that if you have young children under the age of 10, you will definitely want to make sure your salary is covered for the next 10 years should you pass on. If your children are teenagers, you should make sure you have life insurance to last your family at least five years. Once your family is grown, you may determine that you don’t need as much coverage. If you have children who are all older than 18 years old, you only need to consider how much income your spouse needs from you when determining your life insurance coverage needs.

Other Life Insurance Considerations

When looking at your life insurance coverage needs, you should also consider whether your spouse is working, whether your spouse is working full-time or part-time and what percentage of your bills are paid using your salary. If you and your spouse combine your salaries to pay your bills, you should consider how much money you count on in order to get the bills paid.

Even if you have a spouse who has a full-time job that pays equal money, your family may count on both your salaries in full to pay your mortgage, car payments, student loans and other monthly expenses. When you are considering your life insurance needs, you should compute all your family expenses and determine how much money outside your spouse’s salary alone your family would need in order to survive for at least five years.