It depends on age and circumstances. A young person with a family, mortgage, and other debt will want to carry more insurance than a single person or an older person who has no children to support. The best thing is to sit down with a good agent who will do a complete evaluation of your situation and help you determine how much life insurance you need and find an affordable way to help fill that need. At a minimum always carry enough insurance to pay for final expenses, pay off debt, and provide an emergency fund for a surviving spouse, usually at least 6 months income.
It depends on your individual situation. Everyone is different so there is no single answer to that question. I usually recommend enough to pay final expenses. The national average right now is between $5000 and $15000. My recommendation for final expenses would be at least $25000 to help allow for inflation. There are a lot of factors to consider, debt, family situation, and a variety of other factors. Sit down with a good experienced independent agent. A good agent will help you find an affordable solution to your goals and needs.
The biggest factor influencing life insurance need is income and how much of that income needs to be replaced. For example, if someone is making $100k, they are probably bringing home about $5-6k/month, which is what needs to be replaced. You can initially use a multiple of salary to get a rough estimate. 8-10X income is a good rule of thumb, depending on their age and income level. In other words, if someone is young and they have kids and the wife is home, and cash flow is tight, they are probably going to need 12X income. If their income is higher, and/or they are older, then it is probably closer to 8X income. Capitalizing their monthly take home pay, if that is what it takes to run the house hold gives you the most accurate estimate. Using the example above, if they are taking home $5k/month, that is $60k/year. If you divide that number by 5%, you get a pretty accurate figure of $1.2 million, which happens to be 12X income.
There are several things to consider when purchasing life insurance. The first is insurable interest. Who stands to lose financially if you died today? A spouse, children, loved one or even business partner? Who would be left owing your debt or who depends upon your income?
Once you answer this question, next is how much is needed to satisfy this debt or income replacement? Now how long would it take to cover this loss? In other words, how long do you need to repay that debt or how long until your partner or loved one could earn their own income?
Once you have the answers to these questions it will become clear how much life insurance you need and how long do you need to carry it. I recommend using an experienced independent life insurance broker that can shop the market to find you the best coverage at the best price to cover your unique situation.
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Once you answer this question, next is how much is needed to satisfy this debt or income replacement? Now how long would it take to cover this loss? In other words, how long do you need to repay that debt or how long until your partner or loved one could earn their own income?
Once you have the answers to these questions it will become clear how much life insurance you need and how long do you need to carry it. I recommend using an experienced independent life insurance broker that can shop the market to find you the best coverage at the best price to cover your unique situation.