Most people need about 10 times their salary in life insurance, but a financial advisor can find the right number for you

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  • Many Americans don’t have life insurance, and half of those that do don’t have enough.
  • Online life insurance calculators can help calculate how much life insurance you need.
  • For comprehensive coverage, speak with a financial advisor, accountant, and estate planning attorney.
  • Visit Personal Finance Insider’s homepage for more stories.

According to a study from Global Atlantic Financial Group, 43% of Americans don’t have life insurance. And according to Insure, half of Americans who do have life insurance are underinsured, meaning their death benefit would not cover expenses like mortgage, college, food, debts, and clothing for dependents in the event of their death.

The goal of having life insurance is to ease the burden on your loved ones after your loss — to cover the mortgage, education, and other expenses so your family can continue after you die. 

If you have employer-provided group life insurance through your job, note that those policies will end if you retire, are laid off, or are terminated. That is why it is best to have a personal life insurance policy as well.

To know how much life insurance you need, the best option is to speak with a financial professional. However, if you aren’t ready to make a call yet, online life insurance calculators can help give you estimates as a starting point. 

How much life insurance do I need?

When selecting your death benefit amount, the rule of thumb is to select 10 times your annual income. For example, if you make $75,000 per year, then you would purchase a life insurance policy for $750,000. It is not uncommon for people to get $1 million in life insurance.

Generally, you’ll probably want to get as much life insurance as you can comfortably afford each month. If it would be a struggle to make your premium payments, it’s probably too much for you.

Insider created three sample scenarios to estimate life insurance needs for people living in Brooklyn, Dallas, and Denver using SmartAsset’s life insurance calculator. 

Each calculation was based on the following assumptions: a 35-year-old with two kids and a working spouse, with an annual salary of $60,000, owns a median-priced home in their city, plans to pay for children’s college tuition at an out-of-state public institution, and has savings and investments.

The charts below show the estimated life insurance policy needed for five different income levels with the above assumptions:

How to calculate how much life insurance you need

When considering life insurance, it is wise to consult a financial advisor, accountant, and estate planning attorney to make sure you have the proper coverage you need for your goals and budget. Your life insurance needs will change as you age and must consider children, marriage, divorce, retirement, and caring for aging parents. 

A comprehensive assessment will include whether you need long-term care life insurance, disability insurance, and a combination of permanent and term life insurance.

You can use online calculators to get an estimate of how much life insurance you will need. Nonprofit organization Life Happens, for instance, offers an online life insurance calculator that asks a few questions so you can get an estimate of the amount of life insurance coverage you may need. 

An online calculator doesn’t replace the comprehensive advice you would receive from a financial advisor who would look at your financial situation, goals, and estate planning, says Maria Roloff, a wealth advisor at Northwestern Mutual Insurance. However, it will give you an idea of what to expect when you speak with life insurance specialists.

Professionals can give you the best estimate

Everyone’s financial circumstances vary. 

Life insurance, particularly permanent life insurance, can be a tool to build wealth. It’s wise to consult an accountant and financial advisor to determine which policy is best for you and the tax benefits and implications. It’s worth taking the time to find the best policy for you, because once you’ve signed on the dotted line, it’s a lot more difficult to make changes if you need to adjust your coverage.

Find someone you trust with knowledge of the different types of life insurance products along with a background in estate planning. Insider recommends following these steps to find a financial planner. Also, see our picks for best term life insurance companies.

Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.

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