How much Life Insurance do you need

Many people have life insurance, but some may not have as much as they should. Upon the death of an income earner, there are additional expenses to cover besides income loss; these include funeral expenses, mortgage, other debt and future educational expenses for children. Life insurance is usually considered a replacement for the employees lost income. In addition to this, if one partner is a stay at home parent, it is also important for them to also have life insurance. Even though they don’t have an actual salary to replace, there may be additional expenses to pay others to do jobs they currently do such as babysitting, housecleaning and many other errands they do. 

When determining how much insurance is necessary to cover the loss of an income, some experts recommend covering 20 times pre-tax earnings until retirement. One way to figure this is to divide half of the earnings by 0.05. To illustrate, for a salary of $100,000, divide $50,000 by 0.05 to get $1,000,000 of coverage needed. 

To determine how much coverage is needed to assist your children with educational expenses, you will need to take into account how many years until the money will be needed and estimate what the cost will be at that time.  

As the cost of many things is continuing to increase, the cost of final expenses are also increasing. Funeral expenses can cost between $10,000 to $20,000.  That is why it is important to make sure you have enough insurance coverage to have enough money for your family to afford these expenses. 

Along with deciding how much insurance to have, it is also important to decide what kind of insurance to purchase. Numerous policies exist, and include whole-life, term-life and universal-live insurance. The premiums you pay will be determined by your age, health and other factors. 

Some instances where it is important to reconsider how much life insurance you need are when you get married, have children (after each child you have), purchase a more expensive home and if you are nearing retirement. Take in to consideration how much income you will have in retirement. For instance, a retiree receives retirement money from a pension and Social Security benefits. If the pension does not allow a beneficiary, and the Social Security income cannot be transferred to a spouse after death of the primary recipient, then how much additional income will be needed to replace that income via a life insurance policy?

While most people have life insurance, many may not have enough coverage for the expenses after their death. There are many things to take into consideration to determine how much life insurance coverage to have.