Rough “rules of thumb” suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.

Important factors include:

  • Income sources (and amounts) other than salary/earnings.
  • Whether or not the individual is married and, if so, what is the spouse’s earning capacity.
  • The number of individuals who are financially dependent on the insured
  • 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.
  • It is recommended that a person’s insurance advisor be contacted for a precise calculation of how much life insurance is needed.