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3 Considerations When Calculating Your Family's Life Insurance Needs

You've made the decision to purchase life insurance; now it's time to decide how much you will need. Coverage needs are different for everyone but there are some basic considerations to help you decide.

Family Life Insurance Needs

Calculating how much life insurance you need

The decision to get life insurance to protect your family is a big step. Coverage is important, and investing in life insurance is a long-term financial commitment. For these reasons, you want to be certain that you have enough coverage to meet your needs, as well as a policy that you can easily afford. So what's the magic number when it comes to buying life insurance?

For many people, the decision to buy life insurance isn't as hard as deciding how much to buy. In fact, according to a recent study conducted by the Life Insurance Marketing and Research Association (LIMRA), four in 10 Americans don't know how much life insurance they need.1 At Protective Life, we don't want anything to stand between you and getting right coverage for your family. While we understand that every situation is different, the following three considerations may help j you better gauge how much life insurance you may need.

  • Consideration #1: Having enough to replace your income.

    Stop for a minute and think about what your life insurance policy does. If you were to die, your paychecks would stop, right? The fact is, your income is quite possibly your greatest asset. Because of it, your family can afford to live their current lifestyle. When it comes to calculating how much life insurance to buy, at the very least you should look at having enough to replace your income so that your family will have what they need to maintain their standard of living.

  • Consideration #2: Calculating how long they'll need the income.

    If you're raising very young children, you may want to consider having enough life insurance to offer financial security until they turn age 18. However, if it's just you and your partner, then you may not need to replace your income for as long. In either case, you'll want to do some math to determine how many years your family may need to have income replacement.

  • Consideration #3: Factoring in your current assets.

    Before you buy a policy, take a minute to look at your assets. How much do you have in savings and/or investments? Do you have any additional income streams such as commercial property? Do you have any additional life insurance through your employer? Also factor in any assets that your family can use to live on after you're gone.

These considerations are to help you get started in estimating how much insurance you may need. Keep in mind that in addition to replacing your income, you may also want to consider final expenses such as funeral costs and the possibility of outstanding medical bills, the special care needs of a child or aging parent, and any future needs such as education.

Adding it all up

Now that you've given some thought to your life insurance needs, it's time to do some math. Take the figure you came up with in regards to your income replacement, multiply it by how long your family may need coverage, and then subtract your assets or other income. While it's not a scientific formula by any stretch, it will at least get you somewhere in the ballpark.

If you want an easier way to determine how much life insurance your family might need, try our needs analysis calculator. Simply key in the numbers and the calculator does the math for you!

1http://www.limra.com/Posts/PR/News_Releases/2015_Insurance_Barometer_Study_Finds_Americans_Continue_to_Overestimate__Cost_of_Life_Insurance.aspx

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How to Calculate Your Family's Life Insurance Needs

One of the hardest decisions to make when it comes to buying life insurance for your family is how much coverage you should purchase. This article looks at three considerations that can help you better gauge how much coverage you may need. For more information, visit the Protective Life Learning Center.


All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

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