How much Life Insurance do I need?

There are three areas that need to be addressed when figuring out how much Life Insurance your family needs:

  1. Replacing income
  2. Current debt
  3. Future debt

Ultimately, insurance isn’t free, so the process really is figuring out how much these three areas add up to, applying for coverage and once the underwriting process is complete and we know how much your insurance will cost, we can figure out which buckets we can cover, within your budget. 

The process starts with a conversation, either over the phone or through email. I’m here to help you and your family, but it’s up to you to start the conversation. 

Don’t let a Go Fund Me campaign determine your family’s future…

I’ve been in the life insurance business for a long time and this question comes up every single time.  My answer is always, “How much do you need?”  It’s an impossible answer to know for sure, but we can come close to figuring out what that number is.

Below is the formula I give to anyone that asks this question.  There are three buckets, you can decide to cover 1, 2 or all three, but there is a cost associated with insurance, so your budget will ultimately decide how much life insurance you put in place.

  1. Replace your paycheck.  Most families cannot withstand a loss of a paycheck.  The first bucket you need to fill is replacing that paycheck.  You will need at least $1 million for every $50k of income you will need to replace.  If your income is $125k per year, your first bucket is $2.5 million.
  2. Current debt.  The second bucket is paying off your current bills. Mortgage, car payments, credit card debt, student loans, medical bills, any current debt that causes the outflow of cash from your household on a monthly or annual basis.
  3. Future debt.  This is the third bucket.  Future debt is anything you want to take care of your family for in the future.  That might be college, down payment on a house, money to start a business, annual family vacations, cash in a savings account or a graduation or wedding gift, etc.  Anything that would cause future debt for your family.

Once we have numbers attached to our three buckets, we know how much life insurance we should apply for.  After the insurance underwriting process is complete, we will know how much your insurance will cost and we can figure out what your right number is within your budget.