Budgets and Money

Determine The Right Amount of Life Insurance for You

This article points out key questions to consider when trying to determine how much life insurance you need and provides a needs analysis calculator to assist.

How Much Life Insurance Do I Need?

When you buy a life insurance policy, it's important to get the right amount of coverage. Too little and you could leave your loved ones in a tough financial spot. Too much and you'll be paying for coverage you don't need. Here's an overview of things to think about when you're calculating your needs.

Income Replacement

Is anyone besides you relying on your income right now for living expenses? Perhaps your spouse or your children? If you died tomorrow, they no longer have your paycheck. That's why the first item you consider is income replacement. One easy method is to determine how much money your loved ones need each year and multiply that by the number of years they need it. For example, this could be the total years until your children become adults.

Debts and Obligations

If you have any outstanding debts, you likely want your life insurance to cover these expenses as well so they don't fall on your loved ones. Consider the remaining balance on your mortgage, credit card debt and any other types of debt. You may also want to add some extra money for this category to cover the cost of your funeral and other final expenses.

Total Available Funds

What do you already have saved? You may already have some of your needs covered. In which case, you can subtract that amount from your life insurance needs. If you have any income other than your salary - dividends from stock as an example - you can also count those as you look to offset future obligations. And remember to include the face amount of any life insurance policies that you already own or have through your employer since these may pay out at your death.

Now that you've outlined the basics, you have a solid starting point. There might be other items to consider. Talk over your calculations with your family - and perhaps even an investment advisor - to make sure you haven't overlooked anything. Then you're ready to select a policy that's right for you.

Want to quickly determine how much you might need? Check out our needs analysis calculator to get started.

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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.

Understanding Life Insurance.

At Protective, we believe choosing and buying life insurance should be simple. Our goal is to provide the information and understanding you need to make the right life insurance choices for your needs. From explaining the differences between universal, whole and term life insurance to helping you understand how much life insurance you might need, we hope you'll find everything you need to make smart decisions about life insurance protection.

Do I Have Enough Life Insurance Coverage?

How do you know if you have enough coverage or too much coverage? We recommend you review your coverage regularly and especially when you have major life events like marriage, children or a home purchase. Many people find that they need more coverage when they are in the prime of their career and they have children at home or in college, but as they get older, the amount of coverage they need decreases. Your needs may change based on a variety of factors. Our Life Insurance needs calculator or a financial advisor can help with this process.

Creating your Plan.

Whether you use our online quoting tool or you prefer going to an agent, we can help you understand your life insurance needs. Our goal is to de-mystify the life insurance process and help you feel confident that you have the right coverage. To find a licensed Protective Life agent or get a free life insurance quote, call 1-844-733-5433 or get your free quote online now.