FAQ

What is a good amount of life insurance to have

You decided you should buy a life insurance policy, but now you have a very common question: how much life insurance do I really need?

There’s no single answer to that question, but there are ways to make it easier to choose a policy that meets your current and future needs. this life insurance calculator can help.

Reading: What is a good amount of life insurance to have

calculate how much life insurance you need

Here’s an easy-to-use calculator to help you determine how much life insurance you need.

basic calculation of life insurance need

You can also determine your life insurance need with pencil, paper, and this basic equation:

[financial obligations you want to cover][existing assets that can be used for bills] = your need for life insurance

here is what you could include in “financial obligations you want to cover”:

  • Income Replacement: Multiply the salary you want to replace by the number of years you want to replace it. you want this income replacement to cover current and future expenses.
  • a mortgage: you can include the balance of a mortgage so that your family can stay in their home without fear of losing it. if the income replacement (above) would already cover mortgage payments and other expenses, there is no need to add more mortgage money.
  • Other Large Debts: Would your family struggle with other large debts if you were to die unexpectedly? if so, add them.
  • Children’s college tuition: Add tuition money to ensure your children can afford college if you are no longer around.
  • here is what you could include in “existing assets that can be used for invoices”:

    • Existing Life Insurance: If other life insurance already exists to provide a financial cushion, subtract that amount. however, be careful about relying on job supplemental life insurance, since it doesn’t go with you if you leave a job, you can’t be sure you’ll have it later.
    • Savings: Subtract the savings your family would use to pay expenses. you can include retirement savings, such as a 401(k), or leave it out of your analysis if your beneficiaries want to keep that amount for their retirement years.
    • 529 college savings: If you have a 529 account with money for your children, you can subtract it from your life insurance needs.
    • Funeral Expenses: Many people want life insurance to cover funeral and final expenses. If this cost is not part of a larger policy, some people purchase burial insurance.
    • other methods for calculating life insurance needs

      You may come across other methods for calculating how much life insurance you need. These typically include:

      multiply your income by 10

      See also: An HMO plan vs. a PPO plan, whats the difference | UnitedHealthcare Community Plan: Medicare & Medicaid Health Plans

      or by 5. or by 17. This general rule is difficult to pin down. we have seen many attached numbers. and it probably won’t help you determine an appropriate amount of life insurance. it’s best to look at your total needs and subtract assets your family could use if you died.

      multiply your income by 10 and add $100,000 per child for college expenses

      If you want your life insurance policy to help pay for your child’s college tuition and other related expenses, multiplying your income by 10 may not be enough. For example, if you make $90,000 a year and have two children, your total life insurance need would be $1.1 million.

      This equation can offer a simple strategy for determining need, but it doesn’t take into account other expenses, assets, or unique situations. a life insurance calculator will give you a more accurate representation of your needs.

      the dime method

      dime means debt, income, mortgage and education. the method has to add these amounts:

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