How much term life insurance should you get?

It really depends on your responsibilities and your philosophy.

While Term Life Insurance is designed to protect the ones you love in the event that you pass away prematurely, it is also one of the best returns on your money you’ll ever find. True, you will never live to see it – but literally, a dollar a day could feasibly turn into $250k or more for your family (or beneficiaries).

Basic approach: 3x annual household income.

Consider all of your debt, financial responsibilities, and the cost of a funeral. What will people have to pay on your behalf if you die tomorrow? That is what you want to cover. Figure $10k for a funeral, burial, or cremation. Think of any debt that will roll over to your spouse or loved ones – credit cards, mortgages, car payments. This is your opportunity to leave this Earth even-steven.

Someone who makes $35k per year will typically take out a 20 year, $100k term life policy. In most cases, this will cover outstanding debts, pay for a funeral, and leave your family some time to weigh their options while they mourn their loss.

Someone who makes $250k per year needs a policy in $750k to $1M range.

Aggressive approach: 10x annual household income

If your income is modest and you don’t have much in savings, a robust term life insurance policy may be your opportunity to leave a financial legacy for your family. You’ll see by changing your search parameters on this site, that you can experience some economies of scale by taking out more coverage and extending your term.

If your household income is $50k/year – and you have a $500,000 life insurance policy – that’s meaningful.

Regardless of how much you choose the important thing is that you have a policy. When someone dies early, there are two questions that everyone asks:

1. What happened?
2. Did he have life insurance?