How much coverage should I have?
Most financial experts recommend at least 5-10 times income plus 100K in college expenses for each child. The basic premise for life insurance is to leave keep your family in the same financial situation they are now if you were to die. The best question to ask is if you die, how will that financially impact your family. If yiur family would suffer financially you need life insurance.
There are other ways to calculate how much life insurance is appropriate. The following questions might help you come up with a fairly accurate idea. If you die do you have a mortgage or other debts you would like paid off? Do you have a loved one that would suffer financially if they lost your income? How many years of your income would they need? What is it going to cost to send your children to college?
Still not sure or have questions and dont feel like talking to an agent yet, check out the guide below.
- Calculate obligations: Add current annual salary (times the number of years that you want to replace income) + mortgage balance + other debts + future needs including college and funeral costs. If you are currently a stay-at-home parent, include the cost to replace the services that you provide or the ones that your spouse would be unable to perform such as child care.
- From there, subtract assets such as: savings + existing college funds + current life insurance.