Get Affordable Life Insurance!

Male Female

Get Affordable

Life Insurance!

Male Female

How Much Life Insurance Should I Get?

The amount of insurance you should buy will vary with your age and responsibilities, but it should hinge on the standard of living you want to assure for your dependents, subject to the limitations of your budget. As a ballpark figure, many insurance advisers or agents recommend that you take life insurance that amounts to anywhere between five and ten times your annual income. If you want to narrow it down further, you can perform something like the following calculation (with the caveat that you should only purchase what you can afford):

  1. Income replacement (5 to 7 times annual income)
  2. Outstanding debt (mortgage, auto loan, credit cards)
  3. Educational fund for dependents
  4. Cash needs (emergency, medical and funeral expenses)
  5. Subtract existing liquid assets (cash, savings, etc.) and other life insurance.

It's important to perform this calculation, or some other type of capital needs analysis, before approaching an insurance agent or an online site because otherwise you might end up paying for a policy that doesn't provide adequate coverage, or provides coverage that you cannot afford. It's important to be careful to choose an amount of life insurance that reflects your specific circumstances without under-insuring or over-insuring. Also, it's crucial to re-perform your calculations every few years as your financial circumstances change over time. Calculating how much life insurance to get can become somewhat complicated, but there are several online sites that can give you a quick, general computation of your requirements, and there is always the option of consulting with an adviser who can steer you through the process.