How do I calculate the right amount of life insurance for me?

*Before we think about how much, you should know how it works and what it is used for!

 

To calculate your life insurance needs, start by thinking about your recurring monthly expenses that your spouse and dependents will need to pay for in your absence. These might be things like:

  • Mortgage payments
  • Car payments
  • Payments on any loans or debts
  • Rent
  • Utilities
  • Groceries
  • Medical, dental, or vision insurance payments

 

Next, think of the larger purchases you expect to make in the future, such as:

  • School tuition
  • New car or home
  • Medical procedures
  • Funeral expenses
  • Outstanding debt

 

Finally, think about what you can afford! Your life insurance payments shouldn’t be putting you underwater. Life insurance cost increases with the size of your benefit amount, so you don’t want to overestimate how much you MIGHT need and end up overpaying for life insurance. Thankfully, Stride has a range of plans available for purchase, starting from as low as $6 a month.

 

Let’s use an example.  

 

Max is 35 and works as a bike courier and has a wife and child he wants to provide for should he die unexpectedly. Max has the monthly expenses of:

 

Mortgage: $400

Debt payments: $100

Utilities: $75

Groceries: $300

Medical, dental and vision insurance: $100

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Total: ($400 + $100 + $75 + $300 + $100) x 12months x (retirement age (65)  - current age (35)) = $351,000 for monthly expenses

 

Max also wants to save for his child to go to college and doesn’t want his dependents to have to pay for any funeral costs if he died unexpectedly.

 

College tuition: $100,000

Funeral expenses: $10,000

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Total: $100,000 + $10,000 = $110,000 for larger life event expenses

 

To find the total amount of life insurance Max should purchase, he would add the living expenses to the larger lifetime purchases

Living expenses + Life event expenses = $461,000 of Life Insurance(which would cost him about $30/month through Stride.)

  

 

 

Additional financial insurance products Max could purchase to protect his finances and his family include:

 

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