Figuring Out How Much Life Insurance You Need
August 22, 2008 – 2:15 pmIf you're new here, you may want to learn what this site is about. Please subscribe to my RSS feed to get latest updates on this blog. Thanks for visiting!
This worksheet can help you estimate the size of the minimum death benefit you need.
Add up the following:
1. Your family’s annual living expenses for the number of years you want coverage (remember that these will rise with inflation)
2. Any extras that are important to you, such as the inflation-adjusted cost to: send your kids to college; pay off your mortgage; pay your funeral expenses (about $8,000 today, including cemetery plot); pay estate taxes or leave your children an inheritance
Then subtract the following (all for the total number of years you want insurance coverage):
1. Your spouse’s estimated annual after-tax income
2. Estimated income on your investments
3. Social Security income (call 800-772-1213 for an estimate)
4. Pension income (ask your employee benefits department for an estimate)
Voila! The approximate total death benefit you need. You may have some of this covered already through a policy provided by your employer at work. You can trim the amount by cutting back on certain goals (for example, maybe you don’t want to leave each of your kids a $100,000 inheritance after all.) Still the basic amount of coverage a family of four needs can easily reach into the millions.
If you like this post, please subscribe to my RSS feed to get latest updates on this blog. Thanks for visiting!
| 3.7 (1 person) |
2 Responses to “Figuring Out How Much Life Insurance You Need”
This is a great formula, Sam. I need the reminder to take everything into account when coming up with a figure. Sometimes it feels like I’m throwing money away with all the insurance I have, but it doesn bring peace of mind, at least.
Nice post. Stumbling-
Lisa
By
Greener Pastures (Who am I?) on Aug 23, 2008
Hi Lisa,
Hopefully this helps other bloggers too!
Sam
By
moneyexpert (Who am I?) on Aug 23, 2008