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How to Select The Right Amount of Life Insurance for You

Terry’s life insurance cost $9.95 a month. Sounds like a good deal, right? The cost of a couple cups of coffee a month can fit into most people’s budget. That may work for Terry, but it doesn’t really answer the question, “how much life insurance do I need?” or “How much is the right amount of life insurance?”
A number of factors go into estimating your coverage needs. If you already know your financials fairly well, try our life insurance calculator. It will give you a quick sense of what you’ll need to consider for coverage. Plus, it offers three financial planning scenarios for what you could leave your beneficiaries.
Otherwise, let’s review common considerations that go into deciding how much to purchase.

Does Your Employer Offer Life Insurance Coverage?

If your employer offers life insurance coverage, it can be a cost-effective way to supplement your needs. Large employers negotiate group rates, helping with premiums. And those premiums often come straight out of your paycheck, so you hardly miss it.
But we say supplement because it often benefits people to also purchase private insurance outside of their employer. Why?
A couple of reasons. First, the average person will switch jobs 12 times in their career and employer coverage will end when you leave the company. Second, the best time to buy life insurance is when you’re younger.
If you depend wholly on your employer’s coverage, you may lose more than your coverage when you switch jobs. You also could lose the price benefits of that previous employer or the ability to lock into preferential rates early on with private insurance.

Do You Have Children or Dependents Who Will Benefit from Your Life Insurance Coverage?

If you have children or other dependents who rely on you financially, you will want to include their needs into your plan. Even if you don’t have a family of your own yet, but are planning to, you might include that information.
Again, the best time to buy life insurance is when you are younger. So for many, it may make sense to anticipate your needs, e.g. children, and purchase a larger policy when you can lock in better rates.
If you currently have a family, you will want to consider when your children will be financially independent of you. This will help you with term life insurance policy duration or term, as experts recommend buying enough to cover major financial life events. Your kids not being dependent on you financially is one of them.

What’s Your Annual Income?

A family’s income and lifestyle go a long way in determining how much life insurance you will need. Your annual income gives you a general idea on the money have to replace if you were to die.
And if you’re married, you will want to consider spousal coverage. Homemakers or stay-at-home parents will want to look at coverage because there is a financial value associated with the multiple roles they take on at home.
The costs of items such as child care expenses, home care and maintenance, and family financial planning, add up quickly.

The Wealth or Assets You Have Acquired Affects Need

How much money you’ve already saved can significantly affect how much life insurance you could need.
Depending on your life stage and the assets you’ve already accumulated, you might not need as much life insurance. For example, do you have older children with plenty in retirement savings and college funds set aside? If so, your family’s demands could be less than a family just starting out.
Having accumulated other assets also can provide you some flexibility with your life insurance. Many life insurance policies can be obtained without a medical exam.
These policies are often easier to obtain and get you into your policy more quickly. But there are maximums generally associated with your age. That being said, with other savings in place, the policy may meet your financial needs. When you get a quote for life insurance, ask about it.

What You Owe Matters. Debts Can Add to Life Insurance Bill

How much life insurance you need ultimately comes down to what you have, what you owe and how you plan to help your family if you’re gone.
With that, your debt plays a critical role in determining your needs. Revolving debt, student loans, and mortgages all factor in when considering debt. With a term life insurance policy, your mortgage payoff date is often used to help recommend the length of a policy.
Fewer child expenses and no mortgage payment could mean a lower life insurance bill? Empty nesters indeed.

Including Life Insurance in Your Estate Plan?

Ultimately, your life insurance needs come down to the amount of money you need to pass on to your survivors. The question to answer: How much financial security are you seeking for your family?
A whole life insurance policy intended to help leave a sizable inheritance will look a lot different than a term life insurance policy looking to cover major expenses.

Get Your Life Insurance Recommendation

Ready to figure out “how much life insurance I need?” Try our life insurance calculator. It will walk you through several of the questions and propose a life insurance policy value and coverage length or term.
Or contact a SelectQuote licensed agent. They can assist you with a life insurance quote or provide more information on different life insurance options and policies.
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  1. kevin birney

    I just did a 2 million 30 year term. Do you sell whole life? Can I get a whole life policy with the physical I just did or do I need another one. Please send some quotes–thanks

    • Rachel Spear

      Hi Kevin. Connect with one of our agents at 888-279-6192.They will work with you to assess your situation and get you some quotes and answer your questions about the physical.