How Much Life Insurance Do I Really Need?

I have often been asked how much life insurance someone really needs. If you a single and have no dependants then the only things that need to be considered is any debts that could possibly pass on to other family, paying off any items that you would want to pass on, and to cover funeral costs.

When you start a family, things change significantly. When you get married, the two of you now share finances. Your life goals now include each other. Before having children, many people, mostly men, argue that if they died, their spouse would be fully capable of going and getting another job, so why do they need to get life insurance.

I have even heard a man say, if I left here with a lot of money, she would get remarried and the money would go to some other guy. My advice, now that you are married, it is time to think about someone other than yourself. Even if you don't have children yet, maybe your spouse will be so emotionally distraught that they won't be able to work for a year or so. Maybe they won't want to have to move out of your current home. And maybe, just maybe, you love them enough that you want their lives to be blessed in any way possible.

Once you have children the other needs for life insurance become even more obvious. In many cases the wife is a stay at home mom and deserves the opportunity to continue doing so if the bread winner passed away. While the loss of a loved one is certainly very tragic, the tragedy can be significantly compounded when your children need to be pulled out of school. Or when your family is required to sell the house and move in with parents. What about the dreams you had about sending your children to college. The death of a bread winner, can give such a devastating blow that it can financially change the course of your family's life forever.

Now back to the original question. The rule of thumb about life insurance is to have ten to twenty times your annual income plus the amount to pay off any debts or other expenses. Often times your employer will offer you a basic amount of life insurance with no exam, but keep in mind that this coverage only lasts while you are employed there.

My final recommendation is to have this discussion with a financial professional, and listen to the opinion of your spouse. If someone is depending on you, make sure you can deliver.