How Much Life Insurance Do I Need? 6 Factors You Need to Consider

No life is the same as another. It makes sense that there is no such thing as a one-size-fits-all life insurance policy, but how do you calculate how much life insurance coverage you might need? There are various determining factors that can range from income to debt to family size. Before shopping for a policy — or purchasing additional life insurance protection — it’s important that you understand the factors that affect how much life insurance you need.

Do You Need Life Insurance? 

You may be wondering whether you need life insurance at all. Some people believe you only need life insurance if you have a family that relies on your income, but that’s a common misconception. In reality, everyone can benefit from life insurance coverage. In addition to common uses, like protecting your income, life insurance can be used to cover burial expenses, pay your remaining debts and even support charitable organizations of your choosing.

6 Things to Consider When Buying Life Insurance 

Of the Americans who have life insurance, one in five felt they needed more coverage, according to one survey. How do you calculate how much life insurance you need? Here are six things to consider.

1. Income 

The amount reported on your tax return plays a significant role in how your life insurance needs are calculated. As a rule of thumb, the more you earn, the more coverage you need. Insurance professionals suggest that a policy at least 10 times your annual salary is a reasonable amount for life insurance. Your Farm Bureau agent can help you determine how much life insurance you may need.

2. Debts 

Any life insurance policy you take out should be able to cover all of your debts, so take a moment to calculate what that means. Think about mortgage balances, car loans, student loans, credit card balances or other debts that would be a burden to your family. A life insurance policy could help pay those debts in full. If. The more debt you have, the more life insurance you may need.

3. Savings 

Reviewing your existing assets will help you determine how much life insurance you need. If you have significant savings and investments that can be used to cover burial/estate expenses, pay off debts and provide a financial cushion for your family, you’ll need less life insurance than someone with fewer assets.

 4. Existing Coverage

It’s possible to have more than one life insurance policy, and that’s useful to keep in mind when calculating how much life insurance you need. Many employers provide life insurance to employees. After reviewing your employer’s coverage, you can decide whether you need your own personal policy.

5. Family Size 

You may need more life insurance if you have dependents. How many children would you need to provide for? How old are they? A young child needs more life insurance to support them into adulthood than a college graduate with their own income. Your family’s needs over time should be part of your life insurance calculations.

6. Future Needs 

Life insurance helps protect your family. That means purchasing enough coverage for their future needs, including educational expenses. You can benefit from unexpected uses of life insurance, including paying your children’s tuition fees. How much will it cost to send your child to college? Use that number in your life insurance calculations. 

We’re Here to Help

Not sure how much life insurance you need? Our online calculator is a good place to start. You can also make an appointment with your Farm Bureau agent to discuss your life insurance needs.