How Much Life Insurance Is Enough?


One reason for choosing a life insurance policy is to figure how much your dependents will need after you’re gone. In order to choose the face value (the amount your policy pays if you die) of your life insurance you should consider the following:

  • How much debt you have: you could decide to pay off all of your debts in full, like car loans, mortgages, credit cards, etc.  Or you can elect an amount to pay off just those that make sense. 
  • Income Replacement: One of the biggest factors for life insurance is for income replacement which will be a major determinant of the size of your policy. If you are the only provider for your dependents and you bring in $40,000 a year, you will need a policy payout that is large enough to replace your income plus a little extra to guard against inflation. Just to replace your income. Consider how many years you'd like to replace in determining the amount needed.  Social Security may help, but discuss this with an agent to make the right choices and needs. 
  • Future Obligations: If you want to pay for your child's college tuition you will have to add this to the amount of coverage you want which can be significant depending on the number you have and where they might attend college.  Giving them some assistance would be a plus for them.

*Don't forget those potential final expenses, like medical bills, funeral expense, costs to meet emergency family needs in your absence; there is a lot to consider in making the right choice. 


Once you determine the required face value of your insurance need, we can work up some numbers for you and the right policy option. 

Obviously there are other people in your life who are important to you and you may wonder if you should insure them. As a rule, you should only insure people whose death would mean a financial loss to you. If you have a spouse or partner that also is a contributor to the family income, then it would make sense to go through the same exercise to determine the face value of the policy.