How Much Life Insurance Do I Need?
Think about how much your loved ones may need to replace your income.
What is the rule of thumb on how much life insurance coverage you need?
For calculating the minimum coverage you will need, you can go by the common thumb rule of having a sum assured that is 6-10 times your annual income. So, if your current annual income is $50,000 per year, you will need $300,000 to $500,000 of California Life Insurance.
Income Replacement
One of the biggest factors for life insurance is to replace income. If you are the sole provider for your dependents and bring in $50,000 a year, for example, you will need a policy payout that is large enough to replace your income, plus a little extra to guard against inflation.
Life insurance can be a helpful financial tool to have but buying a California Life Insurance policy does not make sense for everyone. If you are single and have no dependents with enough money to cover your debts as well as the expenses related to death—your funeral, estate, attorney fees, and other expenses— then you may not need life insurance. The same applies if you have dependents as well as enough assets to provide for them after your death.
But if you are the primary provider for your dependents or have a significant amount of debt that outweighs your assets, then insurance can help ensure your loved ones are well taken care of if something happens to you. Having a life insurance policy could also make sense if you own a business or owe cosigned debts, such as private student loans, for which someone else could be held responsible if you pass away.
Who may need term life insurance?
Term life insurance may be a good option if you have people (or even pets) who depend on you financially. You may want to purchase a policy that will correspond with how long they’ll be dependent on you — for example, if your children are young or in college. The tax-free payout can help provide financial peace of mind for your family. They can use this money to replace lost income, maintain a certain lifestyle and pay off any outstanding debts such as a mortgage.
And keep in mind that wage-earners aren’t the only people who may need coverage. Stay-at-home parents provide childcare that would need to be replaced if something happened to them. So, as you are considering your needs, it’s important to take these expenses into consideration, too.
How much does term life insurance cost?
The monthly cost for term life insurance will vary based on your specific situation. For example, the younger you are, typically the lower your premium will be as you are less likely to pass away before your term ends. Women also tend to pay less because on average they live longer than men. How healthy you are is also a factor in your cost.
AVERAGE COST OF TERM LIFE INSURANCE
