How much life insurance protection does your family need?
Get a ballpark figure of how much life insurance you and your family need using one of these simple formulas.
- The easiest way to calculate how much life insurance you need is to simply take your annual salary and multiply it by 8.
- A more detailed method is to add up the monthly expenses your family will have after your death. Remember to include one-time funeral costs, as well as ongoing daily living expenses and obligations such as a mortgage or school bills.
Take the ongoing expenses and divide by .07. That indicates you'll want a lump sum of money earning approximately 7% each year to pay these ongoing expenses. Add to that amount any money you'll need to cover one-time expenses and you'll have a rough estimate of the amount of life insurance you need. You may want to run this by your personal financial advisor who understands your specific financial obligations since individual situations vary.
You can also use this free online calculator to estimate how much life insurance you and your family need.