What is the average amount of life insurance?

Tsaico

Platinum Member
Oct 21, 2000
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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?
 

corwin

Diamond Member
Jan 13, 2006
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Bare minimum should be enough to wipe out all debts with enough left to cover your salary for about a year...there's no "average" to go on since amounts will vary from person to person

That's what I use anyway
 

NiteWulf

Golden Member
Jan 3, 2003
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Only numbers I've ever heard are 8-10x your income. Reasoning is that your family can throw the money into investments and live off the interest for a prolonged period.

If your sister is carrying only 50k, she probably has some form of whole life and can get several times that coverage with the same premium cost if she switches to term life. In short, she's wasting money. Some small amount of her premium is going to a savings account that she can cash out or borrow against while she's still alive (the savings account money magically disappears when she dies, and only the policy's face value is paid out), and getting a crappy return on the amount that's in there.
 

FoBoT

No Lifer
Apr 30, 2001
63,084
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fobot.com
they used to recommend 4-5 times the annual salary of the person being covered, now sales people will tell you ten times. one of the main things to consider is, are any of the dependents able or likely to be capable of replacing some of the income themselves? if not, go for more, if yes, then a little lower should be ok
 

D1gger

Diamond Member
Oct 3, 2004
5,411
2
76
My wife has $2m term insurance on my life ... and yes, I sleep with one eye open. :)

She wanted enough to never work again, and make sure our kids are able to get a good education, and help with getting into real estate. It is about 5 years of my earnings.
 

sactoking

Diamond Member
Sep 24, 2007
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Rather than use a multiplier, which is worthless, or pull a number out of your ass, which is worse than worthless, why not Google "life insurance needs analysis" and find out how much you really need?
 

Elbryn

Golden Member
Sep 30, 2000
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the point of life insurance is to cover your family/kids until such time they can survive on their. we defined that as getting to college. you take into account your existing net assets, the potential for work for your spouse and estimate what they can bring in. compare that to the amount you think is going to be needed to make it per year until the kids can go on their own. for us, we got a mil on myself, 500k for the wife, and another 2.5x salary from my work.

disability is something you should also consider.. it's more probably to be disabled than it is to get killed.
 

sixone

Lifer
May 3, 2004
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At minimum, you should carry enough life insurance to pay off every penny of debt.

After that, it depends on who will receive the money. If you have kids, get as much coverage as you can reasonably afford.

Get term life insurance, not whole life.
 

Bignate603

Lifer
Sep 5, 2000
13,897
1
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You need to work backwards. Figure out how much debt you have. Then add on the needs that your family will have. This might include:
Lost income minus your personal expenses (the additional costs that are specifically for you, like clothes, food, paying for a second car, etc)
Cost of daycare for kids if one of you was watching the kids while the other worked
College costs for kids
Any other goals that you have for your family

After you do all that you'll know how much you need.
 

brianmanahan

Lifer
Sep 2, 2006
24,501
5,907
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My wife has $2m term insurance on my life ... and yes, I sleep with one eye open. :)

She wanted enough to never work again, and make sure our kids are able to get a good education, and help with getting into real estate. It is about 5 years of my earnings.

because everyone on atot makes > 250$k

also, if your wife is used to that kind of money she is gonna blow through 2$m like nothing
 

Jumpem

Lifer
Sep 21, 2000
10,757
3
81
Mine totals $1.2m, and my wife's totals $800k. This is a combination of both our employers, and a third party policy.
 

Ichigo

Platinum Member
Sep 1, 2005
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At minimum, you should carry enough life insurance to pay off every penny of debt.

After that, it depends on who will receive the money. If you have kids, get as much coverage as you can reasonably afford.

Get term life insurance, not whole life.

There's no equity in term life.
 

Rumpltzer

Diamond Member
Jun 7, 2003
4,815
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I'm carrying $1M through work. If I die on a business trip, they double it to $2M. If I die on a business trip while wearing my seatbelt, my beneficiaries get an extra $1M.

We've all got our fingers crossed!


My company offers 1X annual salary "free" as part of our benefits. You can add multiples up to 10X your annual salary, but it caps out at $1M. I think I pay an additional $28 bi-weekly to cap it out to $1M.

Like I said, we've got our fingers crossed.
 

Dr. Zaus

Lifer
Oct 16, 2008
11,764
347
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If you understand whole life then you know not to buy it.

Term life should always be purchased and the residual between whole and term invested so that you can self-insure after your term is up.
 

xSauronx

Lifer
Jul 14, 2000
19,582
4
81
ive got 250k in term life; not much debt, but i have 2 kids for their mom or whoever if something happens to me