Answer: How Much Term Life Insurance Do I Need to Buy?

From a question posted here:

Thank you for all your help in my previous question. After meeting with the agent, I’ve decided on term life insurance over whole life. But I am still not sure how much term life I should buy. Should I buy as much as I could afford or some specific amount?

My answer(edited a bit):

That question is far too open-ended.

Are you married?  If yes, are you the primary breadwinner?  Do you have children?  Investments?  Savings?

Here’s my situation:

I am married, with three children.  I have the primary income.

We have a mortgage, a car payment, and some consumer debt.

I added up all of the debt as my base level of term life insurance.  My family will not be burdened with debt if anything happens to me.

To the base level, I added 5 years of my net income.  Without changing a thing, my family will be supported exactly as is for 5 years if I die.   They won’t, however, have the same level of expenses, due to the base level of insurance paying off all debt.   All of my living expenses also evaporate.  For example, there will be one car sold, one less mouth to feed and body to dress, etc.

I figure with the lower expenses and no debt, my insurance will support my family for 10 to 15 years if my wife manages the money right.   If she continues to work, it should last almost forever.

How do you figure the “right” amount of life insurance?[caption id="" align="alignright" width="196" caption=" "] [/caption]

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