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how much life insurance do I need

How much life insurance do I need?

You have decided you should purchase a life insurance policy, but now you have one all-too-common question: How much life insurance do I really need? 

There’s no single answer to that question, but there are ways to make it easier to select a policy that fits your current and future needs which we will outline below. 

How to calculate how much life insurance you need 

For a quick answer: Multiply your income by 7 times 

This really depends on what stage of life you’re at and how many dependents you have. Younger people with greater financial commitments require more coverage than older people.  

Certainly, if you have dependents and are the sole breadwinner in your family, it’s a good idea to take at least 5 times your gross annual income in life insurance coverage.  

Many experts recommend even more – it’s not uncommon to suggest 7 or 10 times your income if you have several children and a large mortgage.  

Remember, the incremental cost of purchasing extra coverage is not that great, so it’s worth buying more coverage to ensure your family will be taken care of no matter what. 

For the budget conscious: Use the 1% income rule 

The 1% rule is simple: Choose a coverage amount that will get you premiums totaling about 1% of your annual income. 

It’s important to make sure that the policy you are purchasing is one that you can afford even on your worst day, month, or year. One percent is an amount most people can fit into their current budget without making other sacrifices. If affordability is your top priority, the 1% rule may be the right estimation method for you. 

Takeaway 

Overall, figuring out how much coverage you need is an important decision, but all the options and numbers can get overwhelming.  

Insurance consultants at i-Brokers can answer any questions you have about how to make a life insurance coverage estimate based on your finances.  

We can walk you through different scenarios and options that make life insurance part of your long-term financial plan and ensure that you’re protecting what’s most important to you. 

Want to learn more? Reach out to us at [email protected]  

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