Preparing for the Worst: How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

According to time.com/money, debt in America is climbing. The average debt for Americans in the 25-45 age bracket is a whopping $100,250.

Debt is one of many reasons Americans should consider a good life insurance policy. The right policy can protect your loved ones, should the unthinkable happen to you.

Life insurance can also be used to plan for an inheritance, save for college or make charitable gifts. In short, it's a tool you can use to provide for the people you love.

Most people have questions around "How much life insurance do I need?"

In this guide, we'll walk you through some of the major considerations to help answer this question. We'll also review some popular methods for deciding how much life insurance you need.

Take Stock of Your Life

The first thing to do is answer a few questions about your lifestyle.

People have different insurance needs at different stages of their lives. A single, unmarried twenty-something won't need as much coverage as a married person with a new baby on the way. Older people looking at retirement have will also have different needs.

Your accumulated debt should be a consideration, as well. If you don't have very much debt, your estate will have fewer expenses to pay. If you have a high level of personal debt, you'll want to increase your coverage to ensure your debts can all be paid off.

What do You Want Life Insurance to do for You?

Another question to ask is what you want your policy to accomplish.

People with high debt might want to make sure their policy will pay those debts back in full, and not leave anything that their family must take care of.  Parents might want to make life insurance part of an inheritance for their children or as a way to help pay for college. You might also consider charitable donations to an organization you support.

What Kind of Policy Is Best For You?

When you ask, "How much insurance do I need?", you'll also want to think about the type of policy you're considering.

There are two major types of life insurance. The first is term life insurance. It's a great choice for people who have large debts that would need to be repaid if the worst happened.

The other type is whole life insurance, which is a permanent policy with higher premiums.

Whole life insurance policies are often used to supplement retirement income. The funds can be used while you're still alive.

Your Best Option

Answering these questions will help you evaluate your life insurance needs more accurately.

A couple common ways used to calculate a dollar figure estimate for the amount if coverage you need, is to multiply your annual salary by the years left until you retire.  The second is to multiply your income by 10 and add $100k per child for college.

 There are also life insurance calculators that can be found online that will give you a rough estimate.

The best way to ensure you have the right amount of coverage and the right policy for your specific needs, is to talk with your local insurance agent.

Find the Right Life Insurance Policy for You

Everyone’s needs for life insurance are different.  The answer to “How much Life Insurance Do I Need?” will be unique to you.

With something as important as taking care of your family, talking to people who know insurance will give you peace of mind.  Your local insurance agent is ready to help you find the right policy, with the right amount of coverage, that fits within your budget.  

Please click the button below to get in touch with your agent today.