Myths vs. Reality: How Much Life Insurance Do You Really Need?

Life Insurance Myth #1: “It’s too expensive.”

Life insurance costs are based on age, health, policy type, and the amount of coverage. Given the competition in the industry and the fact that people tend to overestimate the cost, life insurance rates are probably much more affordable than you think.

Life Insurance Myth #2: “I’m too young to worry about life insurance.”

Think of life insurance as an investment in your future. Like any type of financial investment, you can always find the best terms when the risks are lowest to the insurer. The younger and healthier you are, the lower the cost of life insurance. Start early and lock in a policy at a very low cost for long-term protection.

Life Insurance Myth #3: “I don’t need life insurance.”

The case is clear for families, but you shouldn’t assume you don’t need life insurance if you’re single, you have no kids, or you’re a stay-at-home parent.

For example, if you have aging parents or siblings, life insurance can provide for them when you’re gone. If you have a business, life insurance can support business partners and employees. And you may not have income as a stay-at-home parents, but replacing the work you do every day can be incredibly expensive.

Life Insurance Myth #4: “I get life insurance through my employer. That’s enough.”

Employer-sponsored life insurance is a valuable benefit. But coverage typically ends if you change jobs or retire. Also, policies are usually about one or two times your salary, which probably isn’t enough to cover financial obligations.

How Much Life Insurance Do You Need?

The general rule of thumb is to have enough life insurance coverage to cover 10-12 times your annual salary, but no single formula applies to everyone.

1. Start by adding up your current and future financial obligations, such as:

• Mortgage or rent
• Debt (credit card, auto, student loans, etc.)
• College costs
• Childcare
• Ongoing living expenses
• Funeral costs

2. Subtract financial assets and resources, such as:

• Investments
• Savings
• Retirement accounts
• Employer benefits

3. Multiply your annual salary by the number of years your family will need it.

These calculations will paint a clearer picture of the gaps that life insurance can fill and how much your family will probably need in the future.

Decisions about life insurance are very personal. At Stanton Insurance Group, we can explain your options so you can choose the right path with confidence. Schedule an appointment today!