Secure your family's financial future. Learn how to determine the amount of life insurance that is right for your family.

Life insurance is a vital investment to protect your loved ones if you pass away. It pays more than just
funeral expenses; it helps protect your family’s financial future. That’s why you can choose a wide range of
death benefits, from around $100,000 to over $1 million. The higher the death benefit you choose, the
higher your life insurance premium will be.

So how do you determine how much life insurance is right for your family, without overpaying? Your
financial advisor can provide specific guidance, but here are some general factors to consider.


Your annual salary will help you determine how much life insurance you need. Most insurance companies
recommend purchasing a life insurance policy worth six to 10 times your annual salary.

If you are not employed because you are a stay-at-home parent, figure out how much money your family
saves on child care and related expenses due to your being at home, and then use that amount as your
salary to calculate your life insurance policy.

Remaining Years in the Workforce

Another factor to consider is how many years you have left until you retire. A simple measure of how much life insurance you need is your annual salary times the number of years you have remaining to work.

For instance, if you are 50 years old, make $50,000 per year and plan to retire at age 62, you might
consider purchasing a plan that will give you approximately $600,000 ($50,000 times 12 years) in life

Standard of Living

Another consideration is your current standard of living — how much money your family would need to
continue living as they do now.

To determine your standard of living, examine your yearly expenses — how much it costs you to maintain
your lifestyle. Next, multiply that number by 20. Each year, your beneficiary can ideally withdraw 5% of
your death benefit while investing the principal of the death benefit in a way that earns 5% each year. (The principal is the original amount paid into the life insurance.)

By calculating and considering your standard of living, your family can keep their usual level of income for
years after you pass away.


Whatever amount of life insurance you choose to purchase, you need to ensure it will cover your current
debts, such as your mortgage, student debt, car loan debt and any other expenses. It needs to include
these amounts and leave enough to provide for your family’s future.

Family Goals

It’s also important to consider your family’s future goals. Do your children want to go to college? How many weddings would you want to pay for? Was your spouse planning on going back to school? Understand your family’s long-term goals and then build your insurance policy around those goals.

With careful consideration and the help of a financial advisor, you can secure the right policy for you and your family.