How Much Life Insurance Do I Need?

Life insurance takes care of your family’s financial needs by paying for your end-of-life expenses. It’s important to ensure you receive the right amount of coverage, so how much do you need?

Life Insurance Policies and Coverage

First, let’s discuss the range of coverage you can purchase from each life insurance policy. A common life insurance policy is whole life, which offers a death benefit anywhere from $200,000 to more than $1 million.

The death benefit is a sum of money issued when you, the policyholder, pass away. It will go to the person or people you choose called your beneficiaries. They will use the money on your behalf to take care of your end-of-life expenses like funeral planning, mortgages, etc.

Universal life insurance offers the same range as whole life insurance. Still, besides the death benefit, it also offers more opportunities to grow your living benefits, i.e., funds you can use while you’re living.

Term life insurance has a lower monthly premium and needs to be renewed every 10 to 30 years. This death benefit ranges from $100,000 to $500,000.

Final expense insurance has a smaller death benefit at $2,000 to $50,000, but it is the easiest policy to qualify for. You should invest in this policy if you’re older or in poorer health and need coverage for smaller end-of-life expenses.

Estimate Based on Your Life

The rule of thumb to calculate the amount of life insurance you need is to multiply your income 10 to 15 times. Life insurance is often used to cover your family’s day-to-day living expenses, and having your yearly income for 10-15 years will take care of them for a long time, at least until they’re able to sort out their finances without your income to support them.

If you want to make an even more detailed estimate, use the DIME method:

  • Outstanding debts
  • Your Income multiplied by the number of years your family will depend on it
  • The amount left on your mortgage
  • The cost of your children’s education

If these expenses fit into your budget for a life insurance policy, you can purchase enough coverage to take care of just about everything. The sooner you purchase your life insurance policy, the more affordable it will be.

Talk To Experts for Your Best Estimate

Better Insurance Management will help you understand your coverage needs and protect your family for the future. To learn more, call (732) 458-5000.