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How Much Life Insurance Do I Need?

It’s not uncommon to wonder how much life insurance you should have. Luckily, there are a few aspects and goals you can focus on to make sure your question is answered. This article will help give you a better understanding of how much life insurance you may need.

How life insurance works

First, let's review how life insurance works. A life insurance plan may come in handy if you want to support loved ones after you pass. Usually, the policyholder pays scheduled premiums in exchange for the life insurance company paying their beneficiary a sum of cash after they pass.1 With most life insurance companies, you’ll determine how much life insurance you need upfront.

What does life insurance cover?

Before determining how much life insurance you need, it’s important to understand what life insurance covers. Typically, a life insurance plan covers a death benefit or sum of money given to the beneficiary after the policyholder passes.

The death benefit can be used to help with a host of needs, like missing income, everyday utilities, and monthly expenses. If you have any dependents, you may be able to use the life insurance death benefit to cover their education or childcare.2

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Types of life insurance policies for your coverage needs

Aflac offers term, whole, and final expense life insurance. We think you’ll be able to find something that fits your needs in one of these plans, but there are other options. Deciding which type of life insurance works best for you will directly impact how much life insurance you really need.

Term life insurance

Term life insurance is a temporary policy that can give you coverage for a set time period, such as 10, 20, or 25 years. With this type of plan, you'll want to figure out your future timeline to the best of your ability. It’s important to choose the right plan length because you must pass during that selected period for your beneficiary to receive the death benefit.3 Chatting with an agent can help you clarify how much term life insurance you may need.

Whole life insurance

Whole life insurance typically provides coverage throughout your entire life. It also contains a cash value portion that lets part of the premium payments grow in a separate tax-deferred account that the policyholder may be able to access in an emergency.4 You may want to consider this type of life insurance plan if you need lifelong coverage.

Final expense life insurance

Final expense life insurance is a type of whole life insurance plan that can help cover end-of-life costs. In addition to helping cover standard funeral costs, these plans can also help with medical, accounting, and long-term care costs.5

Universal Life Insurance

Universal life insurance may also be worth exploring if you are drawn to growing the cash value in various ways, like using a money market rate or index. Determining if you want cash value is something you should consider when deciding how much life insurance you need.6

Ways to calculate how much life insurance you need

Here are a few tools you can explore to figure out how much life insurance you should have:

  • Calculate your financial obligations: Mapping out any debts or forecasted costs can help you determine how much coverage you need.
  • Multiply your income by 10: A general rule of thumb you can follow is to multiply your gross income by 10 to find out how much life insurance you may need.
  • Multiply your income by 10 and add $100,000 per child: If you have children or dependents, it may be helpful to add at least $100,000 for each one.
  • Use the DIME method: The DIME method asks you to consider your debts, income, mortgage, and education when choosing a coverage amount you may need.7

Aflac offers enhanced life insurance

If you’re wondering how much life insurance you need, we hope this outlined the best approach to figuring out your coverage goals. Chatting with an agent can help simplify the process. Get a quote to see how Aflac can fit into your life insurance budget.

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