What is the average amount of life insurance?

[Guest Robertd]

I am considering a life insurance policy, but not sure about the amounts. I am considering between the 100 and 250k amounts. The difference between them is about ~300 a year. Obviously in the event of my death, I want my family to be able to have some breathing room to deal with my debts and the what not. When i was talking this over with my sister, she was shocked I was considering something so high. She and her husband only carry 50k each.

My reasoning, was it will need to at least cover my annual salary, and and while not quite enough to settle the note on the house, it should be able to cover mortgage payments for several years to either wait on selling when the market improves, or at least be usable as a down for my wife to use to move cheaper (if she or the kids mis-use the money, then well, I tried...) place. But what strategies do you guys who have life insurance use to determine how much to buy into?

[ETA Consulting LLC]

Whatever the strategy, I can tell you that $50K each is not enough. Life insurance is one of those things that you only wish you had more of when the unfortunate happens. Funeral expenses alone will eat up alot. Also, for lack of a better analogy, you have account the impact of one horse being left to pull a wagon that was previously pulled by two. You'd want the house paid off; so that the one remaining doesn't have to make a house payment. If you rent, you'd want enough to purchase a house so the one remaining doesn't have to make a rent payment. You'd want the car paid off. You'd really want to defray expenses for the foreseeable future and not go into an immediate financial strain. At least $250K; especially when you're young and rates are relatively lower.

Just my way of thinking.

Good Luck!

[Bird]

I generally agree with ETK (with a disclaimer that we don't really know enough to make a recommendation, blah, blah).

A rule of thumb, subject again to a lot of caveats about your own situation, is to get 5 to 10 times your annual salary.

[ETA Consulting LLC]

A rule of thumb, subject again to a lot of caveats about your own situation, is to get 5 to 10 times your annual salary.

That puts me back at $25K to $50K :angry:

:lol:

[Guest patcassidy]

Most middle-income families look at a minimum of $250K in term (or temporary) life insurance coverage. It's the bare minimum you should leave them with, even if you combined this policy with a whole life insurance policy on the side. Term life is typically cheaper and available at very affordable rates, so yes, you are doing the very least you can. If you'd like to increase coverage, first do a life insurance needs analysis and find out if this is necessary. You can then shop around on an aggregator website to compare life insurance policies and rates.

Pat Cassidy
Disclaimer: I work for AccuQuote and this is my personal opinion.

[MoJo]

I am considering a life insurance policy, but not sure about the amounts. I am considering between the 100 and 250k amounts. The difference between them is about ~300 a year. Obviously in the event of my death, I want my family to be able to have some breathing room to deal with my debts and the what not. When i was talking this over with my sister, she was shocked I was considering something so high. She and her husband only carry 50k each.

My reasoning, was it will need to at least cover my annual salary, and and while not quite enough to settle the note on the house, it should be able to cover mortgage payments for several years to either wait on selling when the market improves, or at least be usable as a down for my wife to use to move cheaper (if she or the kids mis-use the money, then well, I tried...) place. But what strategies do you guys who have life insurance use to determine how much to buy into?

I've been following this thread and keep scratching my head over one simple thing - no one has asked you what amount you need to cover what you intend to provide. Lots of people can throw numbers around, but it is no substitute for putting pencil to paper (or mouse to spreadsheet) and calculating what actually is needed. Some want to replace their income "forever" while others want to cover expenses for a period of time till the family can develop other sources of income. You said you want to cover the mortgage for a while, till the market improves. Five years? Ten? Other expense you want to cover (college educations for the kids, lifestyle sustainability, a few vacations for the family, etc.) Once you settle on that, then it's a simple present value calculation using expected rate of return, etc.

Personally, I think insurance is a necessary evil, and only a temporary solution until you can essentially become "self insured" through wealth accumulation. Depending on the policy you buy, it can actually be a hinderance to that wealth accumulation. Figure out what really is needed, do the math (and admittedly you want to pad your assumption however you feel comfortable - better to error on the side of providing a bit too much than a lot less than needed) and then shop it around. Buy a good quality term policy that suits your needs, and skip the "rules of thumb" that insurance agents try to use to get you to buy more than is really needed.

[Guest FinanceGuy08]

There are several factors to know about before answering this question. Do you have a family or anyone that depends on your income for day to day survival? If yes then you need to get a recommended 8 - 10 times your annual salary to replace that income. Another question to ask yourself is if you are married and have kids, and if so, do you plan on sending them to college? Do you own a home with a mortgage? How long before that mortgage is paid off? Would you want to leave your family with the burden of trying to pay the monthly expenses necessary to live there, along with the final expenses they need to cover for your burial, and any debt incurred.

[MoJo]

I think the one thing everyone has missed so far is that it not only depends on the debts you have, but on what other assets you have as well. Insurance is an expense, and whatever resources your survivors will have (i.e., your spouses income/prospects, a trust fund from the grandparents, your 401(k) balance, the existence of a pension benefit - and I'm just scratching the surface). The goal should be to build sufficient wealth to be "self-insured" so to speak.

The "8-10 times" income is just a guess - and one that shouldn't be made without a whole lot more information.