How Much Life Insurance Is Enough?

Experts say you should have enough life insurance to provide 10-15 times as much as your annual income depending on your financial situation.

Buying life insurance coverage is an intelligent way to protect your loved ones in case something happens to you. For most individuals, the amount of life insurance you should have will depend on several factors. Still, a good starting point is to have enough to replace your present and future earnings for 10-15 years and cover your beneficiaries’ expenses now and in the future.

How Much Life Insurance Is Enough?

You can get term insurance with a value of anywhere from $20,000 to ten million dollars. Most individuals from 30-49 buy between a quarter-million and one million dollars of coverage. This indicates what people buy, but it may not reflect what they need. To find out how much life insurance you should have, follow this simple formula:

  • Add up all your resources, including liquid assets and income
  • Determine your financial obligations, including all debts and expenses
  • Subtract your income and liquid assets from your financial obligations to see what your coverage gap is.
  • It would be best if you got enough life insurance to cover that gap.


If you have a family of four (two adults, two young children) with an income of $75,000 plus liquid assets of $25,000, your total resources equal $100,000.

Financial Obligations

The family should take into consideration how much debt they have and what they spend every month, including all future expenses. To determine this, they need to look at the following:

  • All monthly bills and expenses
  • The cost of raising each child
  • All debts, including mortgages and loans

According to the United States Department of Agriculture, it will cost approximately $284,570 to raise a child to age 18, or about $15,800 a year. This amount doesn’t include the cost of college or training programs after high school.

If you have a loan that any of your beneficiaries co-signed, they will be responsible for paying off that loan. This could mean they will be responsible for the mortgage, a car loan or other debts. If they did not co-sign, they would be off the hook for those debts. Even if they didn’t co-sign, if your loved ones will want to keep the house or other property, it is essential to have enough life insurance to keep paying the loans. Otherwise, the bank or loan company may seize the property.

In the example above, the family’s total financial obligation would be about one and a half million dollars, less the assets of $20,000. That leaves the family with a substantial burden.

Additional Dependents

We have already figured in the cost of raising children. If the family has other individuals relying on them for financial support, this needs to be added as well. For instance, some individuals are caring for elderly parents or grandparents or paying for their nursing home care. These expenses will need to be included in the financial obligations.


If you plan on your children attending college, a trade school or enrolling in an internship training program, add this to your financial obligations. While this kind of education can be very expensive, it also helps graduates find better employment opportunities and maintain a better standard of living as adults. A typical year of college currently costs about $9,500 for in-state tuition. It can go as high as $25,00 per year for out-of-state tuition at a private college. For a more detailed look at education expenses, visit U.S. News & World Report.

Safety Net

Any time you review your financial obligations, consider not only the necessities such as housing, food, clothing, and medicine, but any extras such as family vacations and presents for birthdays and holidays. Also include a financial cushion for unexpected expenses or changes in circumstances.

Final Expenses

A funeral and burial or cremation typically cost between $8,000 and $10,000. You may also leave behind some final medical bills when you pass away. Including this in your list of financial obligations can ensure your family won’t have to scramble to pay for your final expenses.

Age and Personal Situation

In most instances, the older you are, the less life insurance you will need. You may only need it until a certain age as well. Generally, as your family gets older, the less coverage you will need because your debts and obligations will diminish. Keep in mind that as you age, the cost of insurance will increase, so it is best to purchase a policy as soon as you can.


It doesn’t matter how much life insurance you need if you can’t afford to pay the premiums. Take into consideration how much you can afford to pay each month when purchasing life insurance. While higher premiums provide higher coverage, if you can’t make the payments, you will end up with no coverage at all.

Term vs. Whole Life

What kind of life insurance is best for you? Whole life is in effect as long as you continue paying the premiums, while term life lasts for a set number of years then expires. Whole life is much more expensive than term life. You can spend between six and ten times as much for a whole life policy than you will for a term life policy with the same amount of coverage. For this reason, most people buy a term life policy that expires at a certain age.

Compare Whole Life and Term Life in More Detail Here.

Term life is generally quite affordable. If you’re a 30-year-old man in good health, you can get a 20-year policy for $750,000 for less than $40 a month. If you need a less expensive plan, you can choose less coverage or a policy that expires sooner. The cost will depend on various factors, including the individual’s age, driving record, medical history, and lifestyle. Over time, your life insurance needs may change due to a change in circumstances or the addition of new dependents. If so, you can add a rider to many insurance policies for an additional fee rather than having to get a whole new policy.

You can learn more about the various life insurance options and get a quote by contacting the professionals at SimpleLife.

Are There People Who Don’t Need Life Insurance?

Most adults who have a family will need some life insurance, but there are a few instances when it isn’t necessary or advisable. These include:

Low-Income Families – If you can’t afford to set aside money monthly to pay the premiums. If you don’t have any savings for emergencies, putting money aside in a savings account may be a better idea. If you still want to get a life insurance policy, consider a lower coverage amount or a short term policy.

Twenty-Something Singles – If you don’t have anyone who depends on your income and you’re young and healthy, you may not need coverage. This is also the time, however, when a policy will be least expensive, so buying now would be an excellent way to lock in a lower price, so you have coverage when you do need it. If you don’t have a spouse or children, you can consider making an organization, charity, or even a friend your beneficiary.

Those With Group Insurance – If your employer offers group life insurance, you may have enough coverage already. You don’t need to invest in additional insurance if your group plan provides enough of a death benefit. If the coverage isn’t sufficient, you can augment your coverage with a supplemental policy. You can ask Human Resources about your coverage limitations.

Self-Insured Individuals – If you have enough money saved or substantial investments that provide for your loved ones in the event of your death, life insurance may not be needed. One example of this is an older adult who is retired with a stable income and no dependents. Another example is an independently wealthy individual.

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