How to choose a death benefit
This page treats the question of how large a death benefit a life insurance shopper needs. To learn about the different types of death benefit, visit the Understanding Death Benefits section.
How much life insurance coverage do I need?
Most American families possess some life insurance coverage, but most don’t have enough to meet the expenses which they expect to confront their survivors.
Read on to learn how life insurance needs are calculated. Use our online life insurance calculator to assess your life insurance needs easily and quickly. We also provide a business life insurance calculator.
What expenses will my loved ones face?
Common expenses that a family faces upon the death of either spouse include:
- Final medical costs
- Funeral costs
- Probate costs
- Maintaining a standard of living/replacing lost income
- Child care and education
- Mortgage/outstanding debt
Calculating coverage
Not everyone has the same needs, and those needs persist for different durations, depending on the family. Here are 3 methods for appraising your own life insurance needs:
Rule of thumb
Quick and dirty, at least 7 times one’s annual salary is in the ballpark for someone who is completely free of debt. For the rest of the world, a better death benefit lies between 8 and 15 times an annual salary.
Capital needs approach
This is the approach which our online calculator employs. The basis of this calculation is the weight of your current assets against that of your current and future needs.
Human life value/income replacement approach
Of course, the value of a human life is beyond the reach of any life insurance policy, but a death benefit can replace the monetary value which a decedent might have generated in the future. Life insurance can compensate for the lost contributions of even non-wage-earners: home-making and child-rearing become expensive duties to fill after the loss of a spouse or parent.
Use our life insurance calculator online or compare life insurance quotes now.
