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How Much Life Insurance Do You Need?

Figuring out how much life insurance you need is a difficult process. We'll give you some tips to guide your decision here.

Final Expenses

The average funeral in the United States costs almost $7,000 now. When you add in the costs of floral arrangements, burial plots, etc., this number can easily exceed $10,000. You obviously don't want to burden your family with these expenses, so you should make sure to allow for them in your plan. It's a good idea to add about $10,000 or more to your policy when you get your quote to make sure your final expenses are taken care of.

Income Replacement

If you earn an income, your plan will have to replace that income to maintain your family's current standard of living. On the conservative end, you should have a policy that is worth at least five times your current annual salary. For many people, this is not enough. Depending on your situation, some experts advise getting a policy of up to ten times your current annual income. What kind of coverage you need when you get your quote will depend on how many dependents you have, the age of your children, any special needs of your family, and your debt situation. For example, someone who has three children all under the age of ten and a large mortgage will need a policy that will help pay off the mortgage loan, take care of the expenses of raising three children, and pay for the college costs of three children.

Miscellaneous Expenses

When you get your quote, you can't forget to provide for any miscellaneous expenses that might fall to your surviving spouse or partner when you die. For instance, would your spouse or partner be able to afford health coverage without your plan? Would your partner be able to retire in comfort? Similarly, you also need to allow for any debts you would leave to your survivors. If you have a large amount of credit card debt, for example, you want to get a plan that would help your survivors take care of it without undue burden.

Tips to figure out how much life insurance you need Answers to frequently asked questions about term life insurance