Calculate Your Life Insurance Needs Without the Confusion

Life insurance is an excellent option to provide a financial safety net for your family after you’re gone. However some people may feel intimidated at the prospect of calculating how much coverage they should get.

Here, we’ll show you how to easily figure out how much life insurance you might need.

How Much Life Insurance You Have Matters

After you’ve passed away, life insurance can provide a death benefit to your beneficiaries — the people you choose to receive the money, like family members or others who depend on you financially. This money can help pay bills, the mortgage, and other costs your family may have.

According to LIMRA’s 2024 Insurance Barometer Study, about 42% of American adults (around 102 million people) don’t have enough life insurance or have none at all. This means many families would struggle monetarily after losing a loved one.

Getting the right amount matters. Too little might not help enough, but too much might waste money you could use now. Let’s find the right balance for you.

4 Questions to Help You Decide

1. Who counts on your money?

If people depend on your paycheck, such as your spouse, kids, or parents, you may need more coverage. A parent with young kids might need more than a single person.

Even if you are single, it is important to have enough life insurance to help pay for your funeral and any debts you may leave behind.

2. What bills need to be paid?

Think about your mortgage and other big debts. Many experts say you should have enough coverage to help pay these off.

If you have children, you might want to help pay for their college, too. Even community college can cost a lot.

Your family may also need help with everyday things like food, utilities, and rent.

3. How much do you earn?

A simple way to decide how much life insurance coverage you need is to multiply your annual income by 10 to 15.

For example: If you make $50,000 a year, you might aim for $500,000 to $750,000 in life insurance coverage.

4. What end-of-life costs might come up?

According to World Population Review, the national average price of a funeral can run between $7,000 and $9,000. Medical bills could add thousands more.

Having enough life insurance coverage to cover these costs can help your family during a hard time.

A Simple Way to Calculate

Life insurance doesn’t need to be complicated. A needs analysis walks through things to consider to figure out how much coverage you might need.

Try this: Take your yearly pay and multiply it by 10. Then add what you still owe on your house, plus any other big debts. Don’t forget to add $10,000 to cover funeral costs and $100,000 for each child’s college education.

Let’s say you make $50,000 a year, still owe $200,000 on your home, and have two kids. Your calculation would be: ($50,000 × 10) + $200,000 (home) + $10,000 (funeral costs) + $200,000 (children’s education) = $910,000. You might benefit from $1,000,000 in life insurance coverage.

Common Questions

Is the life insurance from my job enough?

Life insurance through an employer is a good start but might only cover 1 to 2 times your annual pay. Many families need more.

Read More: Is Your Employer’s Life Insurance Enough?

Do I need life insurance if I’m single?

Even single people might want some coverage for funeral costs and debts so family members don’t have to pay.

Next Steps

If you want to get a better idea of how much life insurance you might need for your specific situation, you can use our calculator at WoodmenLife.org/Calculator.

Written by: Diana Henry, Senior Digital Copywriter

Read More

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First-Time Buyer’s Guide: 5 Mistakes to Avoid When Purchasing Life Insurance

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