How do I determine what is the right amount of life insurance to buy for me?

Asked by Katie

7 Answers

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Answered by Elizabeth Beagle, Insurance Agent in Burbank, CA
Some agents would state you need 12 to 14 percent of your annual earnings in life insurance. I believe there are more practical ways of determining the right amount of life insurance for you.
The most important is what you can afford. Life insurance is a long term investment so be sure that you are able to set aside the required premium for the foreseeable future. Making that determination first will lead you more easily to the right decision of the type and amount of insurance needed.
Then determine what need you want life insurance to solve?
• Pay off home
• Provide funeral expenses
• Replace your income
• Debt payoff
• Ensure college funds for your children
This may lead to an amount of life insurance to cover your specific needs.
There are many life insurance calculators available and most agents can assist you with very specific refinements for your needs. However, you will need to be prepared to determine your assets, your short and long term expenses, and your income. | 10.05.13 @ 14:07
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
Answered by Chrissy Blake Lowe, Insurance Agent in Chandler, AZ
Depends on the purpose of the life insurance. In most cases, life insurance is bought to replace income in the case of a death. If this is the reason for buying it you would want to look for 20 to 25 times the income being replaced. For example, if you make $50,000 a year, 20 times that would be $1,000,000 policy. This way if death occurs, the concept would be to try to invest that money and achieve a 5% rate of return on the money and this would get the surviving beneficiary the $50,000. Keep in mind with inflation this $50,000 would be worth quite a bit less in the future, in terms of buying power. So that is why we suggest if possible you go at least 25 times your income, to build in some inflation protection into the stream of income. | 10.14.13 @ 16:53
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
Answered by Burt Williamson, MBA, CFP in San Mateo, CA
There is no right amount of life insurance as your life and the economy will change over time, but nobody ever received a death benefit check and said it was too much money. A simple technique is to subtract your age from your expected retirement date. Multiply the result by your current income. Some will say to use 85% of that amount, but your wife might prefer to have all of it. It's a personal decision. | 01.26.15 @ 18:10
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
Answered by Walter Ramos, Insurance Agent in san jose, CA
The easiest way to find out how much life insurance you need is using the acronym DIME:
D: Debt
I: Income x 10 or 20
M: Mortgage
E: Education or other expenses

good luck!

Walter Ramos | 01.26.15 @ 20:00
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
A
Answered by Arin
Two ways:
1. Human capital = Annual income x number of years going to work.

2. Total debt + legacy amount for family and how many years. | 03.03.15 @ 21:56
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
Answered by Rob Jupille, Financial Adviser in Santa Monica, CA
We simply ask our clients what they would want funded should something happen to them. Some agents use the rules of thumb (10 to 20 times earnings) to justify more insurance than you really need. Get a referral from friends/family who have an agent they trust that can help YOU determine what you need so you won't be sold something you might not need. | 08.05.15 @ 03:40
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
Answered by Ebrahim Rad, LUTCF , CLTC , MDRT in Woodland Hills, CA
There are different financial needs analysis to calculate your life insurance need. It depend to your family, if you have children or not, how old your children are, what are your expectation of life, how much income you need even at retirement. | 02.09.16 @ 06:02
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 18:30
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