How much life insurance should an individual own?
“Rule of thumb” suggests an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.
Important factors include:
- Income sources (and amounts) other than salary/earnings
- Whether or not you are married and, if so, what is your spouse’s earning capacity
- The number of individuals who are financially dependent upon you
- The amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan
- Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)
