While you won’t be able to pinpoint the amount you’ll need to the penny, you can make a sound estimate. Your goal should be to develop a life insurance plan that, following your death, will allow your family to live comfortably without your economic contribution. Also consider the effect of inflation over time. The amount needed for retirement or college 20 years from now is likely to be significantly higher than today.
To estimate the amount of life insurance your family would need, first calculate everything you now provide for your family including:
- Benefits/health insurance
- 401(k) and retirement savings
- Personal services you perform for your family, such as child care, cooking, home maintenance, etc.
Then, subtract your personal expenses including:
Annual spending on personal needs, such as food, clothing, entertainment, etc.
The Life Insurance Needs Calculator can help you get the right coverage.