How Much Term Life Insurance Do I Need?
Since life insurance replaces lost income if something happens to you, the proceeds from your policy should be enough to cover immediate expenses as well as to provide continuous income for your beneficiaries. Most financial planners recommend coverage that’s eight to 12 times your annual income. For example, if you make $50,000, you might consider coverage between $400,000 and $600,000. If you’re younger and just starting a family, you might need as much as 15 times your income to allow for salary increases.
Sound like a lot? Before you go and do anything drastic, you may want to adjust this number. For example, there are some factors that can reduce the amount of life insurance your family will need, such as:
- Social Security benefits
- Other household income
- Savings
- Other income producing assets or investments
Other frequently asked questions
- How are term life insurance rates (premiums) calculated?
- Tips on term life savings