How Much Life Insurance do I Need?

How much life insurance coverage do I need? The answer really depends on your unique financial situation and your specific stage in life.

Protecting your family if you die prematurely provides your family financial security and peace of mind. Once, people actually begin evaluating a life insurance purchase, a few common questions usually occur:

  • How much peace of mind does your family need?
  • How much life insurance coverage do I need?
  • How much life insurance does my spouse need?
  • What type of life insurance do we need?
  • How much will it cost me?

The industry has many different life insurance needs calculators, and needs analysis tools to assist clients in finding the proper amount of life insurance. Many industry experts recommend the death benefit on your policy should equal 10 times the amount of your annual income.

However, the amount of insurance you really need will depend on your current financial situation and what type of lifestyle you want your family to have if you die.

How Much Life Insurance do I Need?

When determining how much life Insurance you need, it is prudent to first ask yourself a few questions:

  • How much financial strain will your death cause to your family?
  • Does your spouse also work?
  • Do you have other forms of income which would continue when I pass away?
  • Do I have group life insurance coverage available through work?
  • Do you want life insurance to pay off your mortgage?
  • Could your family survive without any life insurance?

We have found examples are an easy way to examine the life insurance needs of people. This is because the need for life insurance changes as people get older and take on more financial responsibilities. Here we will look at how much life insurance people need at various stages in life.

Younger High Earning Couple without Kids (DINKS):

The amount of  life insurance may be smaller, if both the husband and wife have excellent paying jobs and can each support themselves independently.

But, if you do have a large mortgage you should cover the balance with life insurance policy on each other in case either of you should die.

Simply, purchase the amount of life insurance coverage needed to pay off your mortgage if either spouse should pass away.

 

Middle-age Couple, One Income of $100,000, Children, Mortgage:

You have several considerations when selecting a life insurance amount, as the only wage earner, with a non-working spouse, two children, and a mortgage

Your first calculation should be based on the death benefit required to generate an income to provide for your surviving spouse and children.

Then, figure the additional amount needed to pay off any outstanding mortgage balance, and to fund the cost of your children’s college tuition.

In the event of your death, this total death benefit will provide your spouse and children immediate funds to replace your income, pay for college, and pay off the mortgage.

  • $100,000 Income (x 5 years) = $500,000 Life Insurance
  • $400,000 Mortgage Balance  = $400,000 Life Insurance
  • $100,000 College Education = $100,000 Life Insurance
  • $1,000,000 Total Life Insurance Required

Retired Couple, Dual Income of $100,000, Adult Children, Mortgage:

For a retired couple with two incomes, the estimate for amount for life insurance required will be a two step process.

First, you should consider two policies to protect each others income to provide for the surviving spouse, and also payoff any outstanding mortgage balance.

Since, you are older and may have other income streams; you can subtract any other income sources that will be available like your surviving spouse’s income, retirement accounts, pensions, and social security.

  • $50,000 Income  (x 5 years)   = $250,000 Life Insurance
  • $300,000 Mortgage Balance   = $300,000 Life Insurance
  • Pension, Social Security          $400,000  (subtract)
  • $200,000 Total life Insurance Required

Types of Life Insurance

What types of policies are available to cover my needs for life insurance? The most popular and affordable type of policy used to protect your income and pay off the mortgage is term life insurance.

But, there are several different types of life insurance policies to provide coverage for your family including:

  1. Group Life First, try to take advantage of insurance provided by your employer which  is often offered as a factor of your income, at no cost as part of your basic benefits package. Typically the death benefit is one or two times your annual salary
  2. Term Life Insurance  This type of life insurance policy is the cheapest kind of life insurance and offers guaranteed death benefits and level premiums for an initial period such as 10, 20 or 30 years.
  3.  Hybrid Life Insurance  These lifetime plans do not accumulate much cash value, but premiums can be guaranteed for selected for periods of time, or to a specific age (i.e.80, 85, 90, 95, 100).
  4. Universal Life Insurance  A permanent cash value policy with flexible premiums and fluctuating interest rates designed to last for you entire lifetime.

How much does Life Insurance Cost?

Now, that you have answered the question, how much life insurance do I need?

Do you need exact life insurance rates based on your age today? You can use our term life insurance cost calculator to find quotes based on your current insurance age. Use Instant Life Insurance Quotes, to find out how much life insurance will cost you in minutes.

Remember, your actual cost will be based on your age, heath, and the amount of coverage you need. If you need help determining the best option for your family, please do not hesitate to call us at 1-877-249-1358.

Sample of rates for a healthy, non smoking, male:

10 Year
 $250,000 $500,000 $1,000,000
45  200 320 547
50 275 485 870
 55 444 810 1,496
 60 698 1,311 2,436
65 1,208 2,295 4,325
20 Year
$250,000 $500,000 $1,000,000
 45 335 591 1,106
 50 490 900 1,697
 55 760 1441 2,744
 60 1,308 2,454 4,730
 65 2,373 4,649 8,925

Eric Van Haaften, LUTCF is the president of Affordable Life USA. We are a nationally licensed life insurance agency focused on finding our clients custom planning solutions at excellent prices. 1-877-249-1358. eric@affordablelifeusa.com