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