How Much Life Insurance Do You Need?

You will typically need somewhere between 10-15 times your income as a rule of thumb, so you have enough coverage to cover all your financial obligations and outstanding debts.

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how much life insurance do you need

If you bump into this article, it means you need life insurance coverage. You might be overwhelmed with a lot of information on the web, but the first thing you need to decide is how much life insurance you need. The type of insurance can tell you the amount of coverage and the premium you need to pay. Finding the right information is not complicated. By reading on, you can understand just how much life insurance do you need.

The following are useful questions to ask, and this article will give possible answers. 

Important Takeaways:

  •  You should have enough life insurance to cover dependents, any debts, other expenses and your salary.
  • Calculate how much life insurance that is needed by subtracting assets from what owe or use our needs calculator.
  • After you find out how much you need you can use our quote and apply platform at Coach B. Insurance to get the best rates possible.

Why Do You Need Life Insurance?

According to statistics from a study by LIMRA, 83 percent of individuals are not interested in getting life insurance because it is expensive. It may be right for many, but most of the time, people overestimate the true cost by 3x the actual price of a life plan. 

The first answer to the questions is if you have other people who depend on you, then safeguard them by getting coverage. If you do not have a large amount of savings in the bank, it is good to look at the best coverage that will fit into your needs and budget.

Hence, it is the same for a spouse who is not working outside the home. There is an economic loss after the death of a stay at home mom/dad. Homemakers have a cash value of at least $500,000 a year. The role and duties of a stay-at-home person are endless.

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What Type of Life Insurance Do You Need?

life insurance definitionThe type of life insurance plan influences the cost and the benefits that you get. If you are not well aware of it, it is good to talk to an expert and experienced agent.

They can help you get through the entire process and give sound pieces of advice. If your main goal is to secure your family financially through a cash value after your death, whole life, or permanent life plan is the best choice. 

However, if you want to protect them from loss of income after your death, you may consider term life. The drawback of term life it has an expiration date but the least expensive.

How Much Life Insurance Do You Need?

In case you said yes to the above questions, you will get to the bottom of your curiosity. How much life insurance should you have. It is the most time-consuming part of the process, but it is not actually complicated. 

You may use a life insurance calculator available online to help you. It can give you a closer look at the amount you might need in the future. Most calculators will ask about your age and actual annual income and debt. They will compute the coverage plus the premium you might need to pay. 

For instance, a 40 years old male earns $50,000 every year, and you choose the recommended amount available for the coverage. Then you might get an estimate of $750,000 of coverage. 

However, it is just an example of the basic calculation, but it can offer you better ideas on the amount you need. If you want to know more right before you talk to an insurance agent, find out more about other factors that can influence the coverage.

Life Insurance Need Calculator
This calculator will help you to decide how much life insurance you need if your survivors invest the life insurance benefits they receive.

Funeral cost, estate taxes, etc. ($):
Amount needed to pay off non-mortgage debt ($):
Amount needed in emergency fund ($):
Amount needed in college fund ($):
Expected average annual living expenses ($):
Expected spouse's average annual income after taxes ($):
Annual Social Security Benefits ($):
Spouse's current age (#):
Value of current liquid assets ($ total of savings, investments, etc.):
Expected survivor's investment strategy:
Life insurance needs:

Other Important Considerations

When calculating life insurance coverage, it is not really what you need but what your family needs after your death. Therefore, it depends on some factors:

  • How much money is needed to meet financial obligations?
  • How much money is needed to sustain the needs of the family for a year or more?

Debt

Life insurance meaningMoreover, debt is a huge factor in computing for the amount you need for coverage. If you have an ongoing mortgage and other debts that you might leave hanging after your death, then you should consider it.

It is not fair to leave a huge debt in your family member’s hands, so it is good to get life insurance. It will pay off your debt in case of your untimely demise.

Expenses

It is important to know your monthly expenses. If you have a monthly budget, then it is very easy to know the numbers. All you need to do is to compute how much you are spending a month. The computed $750,000 coverage might be enough, but that depends on your total monthly expenditure.

In case you die, and your family acquire $750,000 and invest it, they might get $37,500 every year as investment income. However, if the family has the total expense of more than that, then higher coverage is needed.

Savings

If you can save money every month, then you are lucky. One can also have other investments from the bank, bonds, mutual funds, and other assets. The amount of money you need from life insurance also depends on the amount of savings you have.

If you have more savings, the lesser amount you need to apply for. However, it is also important to consider retirement expenses or college tuition of your children, etc. if you already have money for these expenses, you need lesser coverage. Otherwise, you need more coverage.

Other Source of Income

If your spouse is also working and will continue working after your die is also a factor to consider. Hence, compute for the spouse, annual income, and the years you expect him or her to work. 

The Inflation Rate

Also, do not forget to consider the high inflation rate as this is a fact and part of life. The cost of living is increasing per year. So, it is good always to think ahead.

Personal considerations

Although financial obligations are very important, you might also consider personal factors regarding your situation that may influence your life insurance purchase.

Dependents

Whether it’s the rising cost of raising a child or adult care for an aging parent, you may need to increase your policy amount by several hundred thousand dollars if you have any dependents.

Whether you’re expecting your first child or an empty-nester, there is always an appropriate amount of life insurance to fit your specific needs.

Health and age

Not only does your health and age determine how much insurance you should buy but how long your coverage should last as you get older, the need for more insurance declines. Also, one would hope that the debts have gone down and the dependents have moved on, leaving you not to need as much life insurance.

Age is an important consideration when setting your coverage amount but is not a reason to put off getting a policy. 

Life insurance rates increase 5-10% every year you get older. Getting older means you are riskier to insure. If you buy a life insurance policy when you’re young and healthy, you’ll get a more affordable premium for a larger amount of coverage. For that reason, it’s better to lock in cheaper rates as soon as you can.

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What will happen if I don’t buy enough coverage?

A study by (LIMRA) in 2020 and Life Happens found that within six months of a primary wage earner passing way that 44% of people would experience financial hardship. 28% would feel that impact within thirty days.

By not getting a face amount or a term length that meets your family’s life insurance needs, you are putting them at a huge financial risk. Not having the right coverage to replace your income, your family may not be able to keep up with everyday living expenses, plan for the future, or pay for your final expenses, and they could even lose the family home or car due to your outstanding debts.

The Right Policy For You

life insurance approved - coach b. insuranceAfter all of this information, you now have a better understanding of how much life insurance do you need. The next step is to contact an expert and licensed insurance agent from Coach B. Life Insurance. They can guide you throughout the process until you find the best policy that suits your needs.

If you have decided to get one or still have questions in mind, give us a call 1-800-342-1537, and we can help you.

Coach B. is an independent insurance agency that is working with large and reputable insurance providers. They can easily get the best prices for you by dealing with the companies personally on your behalf. It is also possible to get the policy that you need within 48 hours, depending on the insurers you choose. What they do best is to look for the most suitable policy for you.

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About Coach B.

After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.

In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.

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