How Much Life Insurance Do I Need?

mattmims
Apr 24, 2024
2 min read

Updated: Apr 25, 2024

As your insurance agent, I want to make sure you have all the information you need to choose the right amount of life insurance. Here’s a simple guide to help you figure out how much coverage might be right for you.

Life Insurance Help And Value Guide:

Immediate Costs at Death: Start by adding up any costs that would need to be paid right away if something were to happen to you. This includes funeral expenses, any outstanding debts like your mortgage, car loans, or credit cards, and the costs to settle your estate.
- Example: $18,000 funeral expenses + $225,000 outstanding balance with mortgage + $12,000 balance for car + $20,000 student debt = $275,000 total immediate costs
Ongoing Expenses: Think about the daily and monthly expenses your family will need to keep paying to maintain their lifestyle without your income. This includes things like rent or mortgage payments, utilities, groceries, car maintenance, and health care.
- Example: Your youngest child is 3 years old and will be an dependent until the age of 25 years old. You have two older children. (NOTE: Your home is paid off from above)
  - $1500 for health care yearly (x) 23 years old = $18,000
  - $500 utilities cost per month (x) 30 years = $15,000
  - $500 on food per month (x) 30 years = $15,000
  - $3200 per year for all car maintenance + new cars (x) 30 years = $96,0000
    - Current Total = $275,000 immediate cost + $144,000 ongoing expenses
    - = $419,000
Future Financial Goals: Consider big future costs like your children’s college tuition or your spouse’s retirement. Estimating the money needed for these goals can help you decide how much life insurance you need.
- Example: You have three children.
  - College Tuition for Oldest = $50,000 (x) 4 = $200,000 -- includes rent, books, food, tuition
  - College Tuition for Middle Child = $53,000 (x) 4 = $212,000
  - College Tuition for Youngest Child = $57,500 (x) 4 = $230,000
  - Spouses Retirement: $100,000
    - Total Future Financial Cost = $742,000
    - Total Current Cost = $1,161,000
Income Replacement: A quick rule of thumb is to multiply your yearly income by 10 to 15. This gives a basic estimate of the coverage needed to help your family replace your income for several years.
- Example: You make an annual amount of $150,000 per year
  - $150,000 (x) 10 years = $1,500,000
  - Total Current Cost = $1,500,000 + $1,161,000 = $2,661,000
  - TOTAL LIFE INSURANCE: $2,661,000

Review Your Plan Regularly: Life changes, such as a new baby, a new home, or a change in income, mean your life insurance needs might change too. It's a good idea to revisit your life insurance coverage periodically to make sure it still fits your needs.

Please reach out to us in order to find the life insurance amount you need and to receive your quotes.

LifeStein

(888)612-7935

Life Insurance is available in Alabama, Mississippi, Tennessee, Arkansas, Florida, and Georgia.