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How Much Life Insurance Is Right For Me?

Life Insurance: Detemine Your Needs

Many consumers often ask about the ideal amount of coverage that they should be selecting when choosing a life insurance policy. The general rule of thumb is to aim for a death benefit that is between 10 and 20 times the annual salary of an individual. However, it should be noted that there is no guarantee that this rule of thumb will work in all situations. Therefore, the individual requirements of the insured’s must be taken into consideration. One way to do this is by utilizing our Retirement Calculator.

At Advisors Insurance Direct, our life insurance advisors will respond to the question of “How much life insurance do I need?” by asking prospective buyers the following question:

"If I were the person you hired to bring your family or other people you cared about some money upon your death, how much would you like me to bring them each year, and for how long would you like me to bring it for?”

The answer to this question allows your advisor to calculate the amount of life insurance you should have by using future interest rate assumptions. To find out more about this approach and to get your own personal term life insurance quote, contact us today.

Calculating Your Life Insurance Needs

Before giving you a range of life insurance quotes and options from which you choose, our advisors will work through a simple calculation to help determine your actual life insurance needs. This is not just guesswork, but a technical process that involves making estimations on future interest rates. Other providers who are less experienced do not take this approach and are simply guessing at your needs. Here is an example to consider:

  • Assume an individual earns $100,000 per year
  • They apply for $1 million worth of coverage
  • Assuming an interest rate of 5%, upon death this provides only $50,000 per year for the family, which is $50,000 per year short of what the insured was earning while alive

This $50,000 per year of post death family income may work fine but then again it may not. It is important to understand that this newly inherited $1,000,000 may sound like a lot, but for a non-working spouse with a possible family and other obligations, it may not be enough.

Life Insurance and Other Income Sources

In addition to your annual income, it is also important to consider alternative sources of income that can help cover your family’s needs. For example, other sources of income might include social security, pensions, and retirement accounts. By considering all of these factors, you can select the life insurance policy that will work best for you in any given situation.

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Learn Your Life Insurance Needs with Help from Our Financial Professionals

When you are determining your life insurance needs, it is important that you plan for your family or business by working with a highly qualified and educated agent. Advisors Insurance Direct can help you determine your needs and compare options depending on your current circumstances and future goals. Give us a call now to discuss your term life insurance quote and to find a plan that will meet your needs into the future.

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Our Promise

As financial professionals, we will never pressure you to do anything or use silly sales tactics. We are simply here to answer your questions, provide professional advice and walk you through the process of buying life insurance should you decide to move forward.

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