Life insurance can replace your income and provide a financial safety net for your family if you die. To decide how much life insurance coverage to buy, consider future expenses. That includes: Your mortgage outstanding bills, college tuition, funeral costs, childcare and more.
To calculate how much life insurance you need, here are some considerations: Start with an estimate of five years of income replacement. So, if your income is $100,000, it’s wise to buy at least $500,000 of life insurance.
Consider debts and regular expenses like childcare, especially if you are the primary caregiver. The average annual cost of tuition and fees is about $35,000 for private colleges, close to $10,000 for in-state students at public colleges, and approximately $26,000 for out-of-state students at state universities.
The average funeral cost is $8,000 be sure to allow for the type of funeral you want. Once you figure out those costs, you’re able to get a better idea of how much life insurance you should buy.
