Written on July 17, 2013.
If you do a search online asking, “how much life insurance do I need,” you’ll find an endless amount of material.
Some information will be good, some will be bad, most will provide far too much detail, and you can rest assure, most will be boring! Let’s be honest, life insurance is not on the top 100 list of things people like to discuss.
That all being said, having the right type and the right amount Life Insurance is very important!
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Unfortunately, according to LIMRA (an association that provides research, consulting, and other services to insurance and financial services companies, worldwide) with disposable income at an all-time low, American families have to make difficult decisions on what financial priorities take precedence. Unfortunately, life insurance is not at the top of the list. Consider the following:
- Thirty percent of U.S. households have no life insurance at all; only 44 percent have individual life insurance.
- Fifty percent of U.S. households (58 million) say they need more life insurance.
- The average amount of coverage for U.S. adults has declined to (167,000) , down $30,000 from the average coverage in 2004.
- While 4 in 10 households with children under 18 now include a mother who is either the sole or primary earner for her family, yet among women who have life insurance, their coverage is only 69 percent of the average coverage on men.
- Consumers who believe they need life insurance, 86 percent haven’t bought it because they think it is too expensive.
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So, how much life insurance do you need?
Well, the general rule of thumb for years has been 10X your annual salary. Obviously, this is a very general rule, however, it is a good starting point. Below is a chart that provides another fairly good general rule of thumb.
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A more accurate reply to the question, “How Much Life Insurance Do I need?” is:
1. How much will be needed at death to meet immediate obligations?
2. How much future income is needed to sustain the household?
There are literally thousands of places online that you could go and calculate your needs. In my opinion, most of these calculators are far too complicated, ask far too many questions, and utlimately they all come up with roughly the same answer — also note, many of these sites are asking these questions to gain information from you to market to you later.
If you want a good, clear, simple answer to this question, without any pressure or obligation, feel free to contact me anytime.
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*The articles on this blog are for education and entertainment purposes only and should not be taken as financial or legal advice. See legal disclaimer for further information. If you would like more information on how something listed in any of my posts specifically affects you, please feel free to comment below, email me, or call me anytime.