How much life insurance coverage do I need?

Good question. Help yourself determine how much you need by reading this article.

Most people use life insurance to protect their dependents (kids, wife, spouse) who count on their income. For example, even if you’re not the breadwinner, maybe you’re the stay-at-home mom and still might want a life insurance policy to cover the added cost of childcare so your husband-turned-single-dad can keep working should something happen to you.

Other life insurance shoppers don’t have any dependents but want a policy to cover funeral expenses, create an inheritance or make a charitable contribution after they’re gone.

The reason you’re getting life insurance will determine how much of it you need.

If you’re leaving behind people who count on you, buy enough life insurance so that when added up with other sources of income the payout amount will replace:

• The amount of income you generate.
• The cost of any services you provide.
• The cost of life changes as a result of your departure.
• Funeral costs.

Devil’s in the Details

Don’t just think about your salary. Be sure to compute things your dependents are going to have to pay for once you're gone, such as health insurance coverage that they recieved through your job or childcare you provided which will have to be paid for.

What Does Life Look Like After your Death?

Be sure to factor in extra money your family may need to pay for life changing events after your death. Like relocating closer to your in-laws who live half-way across the country in order to adjust to life without you. Maybe your wife will need to go back to school or pay for courses in order to get a better job now that you’re gone.

Keeping a Roof Over Their Heads

Some people get life insurance to pay off the home mortgage when the big breadwinner dies to make sure they at least have a place to live. If this is your goal, the additional amount of insurance you need is whatever you owe on the home.

College Fund

If you want to use life insurance to cover your child's college expenses, be sure to factor in rising tuition, housing and other college-related costs. So instead of judging by rates today, be sure to buy additional coverage to account for college expenses ten or twenty years from now.

Other Sources of Life Insurance

You may already have life insurance through your job. But counting on that alone is not enough. What if you die after leaving that job or become unemployed?

Make sure that you have independent life insurance coverage that will meet your goal as far as what you want to leave behind.

Don’t Overpay for a Life Insurance Policy

Keep your goal for getting life insurance in mind – and keep in mind that the true purpose is to replace the financial loss your dependents will suffer as a result of your passing. Financial planners recommend a policy amount equal to 6-10 times your annual gross income.

Use an online insurance quote comparison website to compare free life insurance quotes and find an affordable policy.