How Much Insurance Do I Need?

How much insurance do I need? This is the question we all ask as we are researching our life insurance needs. If you aren't asking this question then you should be. The unfortunate thing is that there is no hard and fast answer here. The amount of insurance that you need is dependent on many things.

The easiest answer is that you need enough insurance to cover the loss of income that would be incurred, but even this answer is highly variable.

The following are some questions that you need to keep in mind when deciding how much life insurance you need.

How much will my dependents need to live on?

How long will my dependents need this income? Will this income need to be reduced over time due to children leaving the house?

What other possible sources of income will my dependents have such as retirement savings?

If you have done your budget as outlined on this site you will know what your monthly income need is and you can get enough life insurance so that your dependents can continue with the same budget. The insurance proceeds can be invested and the earnings on your investment can be withdrawn as income.

So, the answer to how much insurance do I need is that it depends, but you have your household budget in order to know how much you need.

Also keep in mind that if you have managed your finances correctly you should not need life insurance for your entire life. Life insurance is not an investment, it is only meant to take care of the needs of those left behind.


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