Is There A Certain Amount Of Life Insurance I’m Required To Buy?
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UPDATED: Sep 15, 2020
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Although there are “rules of thumb” such as your life insurance should be 10 times or 20 times or some other multiple of your annual income, the best approach is to consider your own personal needs so that your survivors have adequate life insurance proceeds to meet their financial needs in the event of your death.
To estimate how much money may be needed, you should make a list and estimate the expenses that need to be covered. This could include the cost of paying funeral expenses and the amounts that your spouse and young children need for mortgage payments, household expenses, education, etc.
If you have difficulty drawing up this list, you can seek the advice of a financial planner – preferably one who charges a fee but does not sell products. Or, you can use the “calculators” that are available on many financial and insurance company websites.
The end result of this process is to estimate the amount of life insurance you should have in order to provide adequately for your dependents and survivors.
Of course, this amount will usually change over time due to life changes. Therefore, it is good idea to periodically review your numbers to make sure that they are up-to-date.