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A Realistic Way To Find Out How Much Life Insurance You Need To Take Care Of Your Family

This article on Life Insurance is provided by Everplans — The web's leading resource for planning and organizing your life. Create, store and share important documents that your loved ones might need. Find out more about Everplans »

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There are several kinds of Life Insurance, but the idea is always the same: If the policy is active, your beneficiaries get a sum of money when you die. The larger the payout, the costlier the policy. But what should that payout be?

There are a couple of approaches to answering this question: How much Life Insurance do you need to take care of your family? The first one’s as easy as a ten-slice pie: Get a policy worth 10 times your annual income. It’ll support your dependents for a number of years. Case closed.

But that can be quite expensive if you’re a high earner. And depending on your circumstances, your family might not need such a big cushion, especially if they’ll have other resources from salary, rental income, social security, or retirement or other savings. However, if you’re carrying a lot of debt, this could help eliminate some of the financial pressure.

So here’s another way to figure it: Aim to prevent hardship. Buy enough insurance so your family won’t suffer without your income.

This takes a little more work. You’ll have to add up all the financial obligations they’ll face -- living expenses, mortgages and other outstanding loans, college costs, etc. -- and figure out how much they’ll need to meet them without struggling.

Either way, you should consider consulting a certified financial advisor before you buy. They can help you figure out the right size policy for you and your dependents. And whenever there’s a major life change in your family, review your coverage and see if the new circumstances might call for more (or require less) coverage.

“Wait,” you say. “What if I don’t have any dependents?”

Simple: You probably don’t need Life Insurance at all.

Related Read: All You Need To Know About Life Insurance

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