Finance Quick Answers
Do I need a life insurance policy? If so, how much do I get?
The main reason to purchase a life insurance policy is for the death benefit - life insurance is designed to protect survivors of the insured. If your family or other people depend on your income, you need life insurance to help them live without your support if you pass away.
No general formula exists to know how much coverage
is enough. Examine your current and potential family
situation. A rule of thumb is that you need at least
three times your annual income and at the most ten times
- enough to replace the insured’s paycheck, cover daily
living expenses, and pay the insured’s final medical
bills and burial costs. In addition, the insurance
proceeds should provide income for long-term needs such
as retirement, estate taxes, or college costs.
Call the Life Insurance Advisers Association at
1-800-521-4578. They will put you in contact with an
adviser to determine your insurance needs and they sell
Source: Everyone’s Money Book, 2nd ed., Jordan E. Goodman, 1998, p. 502-504.
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Monday, July 28, 2008