Life insurance calculator: How much coverage do you need?

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Getting the right amount of life insurance is an important part of protecting your family’s financial security. If you get too little life insurance, they may not be able to cover everyday expenses and maintain their standard of living. But if you get too much, you’re overpaying for coverage and losing money that could have been spent elsewhere — such as on traditional savings and investments.
But how much coverage do you need, exactly? Use our calculator to find out.

Life Insurance Coverage Calculator

How Much Life Insurance Do You Need?

If you are looking for:

Extra Income to my family

Money for funeral costs

An inheritance for my heirs

Tips for calculating how much life insurance you need

Your life insurance coverage should be as high as your biggest financial obligation and last as long as your longest debt, like a mortgage.

You can calculate how much life insurance coverage you need in a few key ways:

Calculate 10 times your income

The most common way to figure out the minimum amount of life insurance you need is to calculate 10 times your annual income. For example, if you make $100,000 a year, you’ll want at least $1 million in life insurance coverage.

However, keep in mind that this is the minimum amount of coverage you should get. If you’re only getting 10 times your annual income, you’re technically only providing financial protection to your family for 10 years. But if you have a young child or plan to provide college tuition, you’ll want more than 10 years worth of coverage. So while 10 times your income is the bare minimum, you should account for how many years of coverage you actually want to provide.

The DIME method

The DIME method is an acronym for debt, income, mortgage and expenses. The sum of these factors is how much life insurance coverage you need:

Debt: Your total debt
Income: Multiplied by the number of years your dependents would rely on you financially.
Mortgage: The amount left on your mortgage balance.
Expenses: How much your family would spend to maintain their standard of living.

Calculate your financial obligations and assets

Another way to calculate how much life insurance coverage you should get is to tally up your financial obligations and subtract your liquid assets. The amount left over is the amount of life insurance you should purchase.

Your financial obligations include the annual income you provide, your mortgage, any other debts you owe and other financial support you plan to provide — such as college tuition. While your liquid assets include your savings account and other life insurance policies you own.

Although this takes some extra legwork, it helps you reach a more accurate number because you are tallying up exact numbers.

How to get the best life insurance rates

Once you figure out how much life insurance to get, you’ll want to get that coverage at the most affordable price. Here’s how:

Shop around: Compare rates from at least three insurance companies to see who offers the best rate for the coverage amount you need.
Buy term: Term life insurance is a lot cheaper than whole life insurance.
Purchase ASAP: Life insurance rates increase every year you age, so you should buy coverage as soon as you decide you need it.
Opt for reconsideration: This option is a last resort if you can’t get a good rate when you apply for life insurance because of your health. Once you purchase your policy, you may be able to get a better rate after a year or two if you can prove your health has improved.

There are a lot of steps you can take to calculate how much life insurance coverage you need, but the best way is to talk to an insurance agent who can analyze your needs.