If you have a job that provides life insurance for its employees, you may think you’re totally covered. The truth is, it’s probably nowhere near enough.
While group life insurance policies that companies provide usually equal one to two times your salary, that doesn’t factor in things like your commissions, bonuses or earning power. To replace your income for your dependents, you should insure yourself for 10 to 12 times your salary. And that’s just the beginning.
How to determine your life insurance needs
There are other factors to consider beyond your salary when deciding how much life insurance you need. So open the calculator app on your phone (or dust off a real calculator if you’re feeling nostalgic) and do the math in the list below to determine the amount of life insurance you need to protect your family.
- Multiply your salary by ten (or determine how many years your family would need your income, and multiply your salary by that number)
- Add the cost of raising a child — about $13,000 per year for each of your children, from now until he or she turns 17
- Add $100,000 for college expenses for each dependent child
- Add up your additional debts such as credit cards or car payments
- Add living expenses such as food and medical care, just to be sure you have a cushion
- Add funeral expenses (average funeral expenses are $8,000 to $10,000)
- Subtract liquid assets such as savings, existing college funds, and/or current life insurance
See that grand total on your calculator? That’s where you should start when determining how much life insurance you need. If it seems higher than you expected, that’s okay — overestimating your amount is better than not having enough. If you don’t have any dependents or you’re single, you can modify that amount, but getting insured is an absolute must.
Life is unpredictable, so it’s sometimes hard to know the exact amount of life insurance you need. The good news is, it’s more affordable than you think. Contact your local Alfa® agent today for a free quote and get peace of mind knowing you are taking steps to properly protect your family.