How old are your kids?
The younger your children are, the more coverage you'll want. If you have toddlers, your life insurance needs will look very different from those of someone with teenagers. If you were to die and leave your spouse with a 1-year-old and a 3-year-old, for example, they'd have nearly two decades to get through without your income.
If you have children or other dependents with special needs, you'll likely need even more insurance protection because they could require financial support indefinitely.
What's your income?
Your insurance coverage should adjust as you move through different life stages. When you're younger, early on in your career (and earning power) and you have few obligations, you likely don't need as much life insurance. As your obligations and earnings increase, it will make more sense to have more life insurance.
One general rule of thumb is that you should have 10 to 12 times your annual income in coverage. Make sure to revisit your situation every year and adjust as necessary — especially when your income increases.
If you're a stay-at-home parent, you may not earn a paycheck, but if your children are young and require care, it would cost money to cover the care that you provide. Even if your children are school-age, they'll likely need after-school programming or a babysitter, so make sure to factor in this ongoing expense until they're older and self-sufficient. Think about what this care would cost per year and how many years you might need it to determine whether you have enough life insurance.
How much debt do you have?
It's a good idea to have enough life insurance to pay off any major debts, or at least to make it possible for your spouse to make payments for many years, if necessary. List the expenses in your life that are ongoing, such as a mortgage, car payments and any big credit card balances or private student loans.
When you die, your debt doesn't disappear. And if you pass before your spouse, they'll have less income with which to make payments. Some debt, such as credit card debt, may be forgiven if the estate doesn't have enough assets to pay the balance — but if a spouse is a joint account holder, they'll be liable.
Do you plan to cover college costs?
In addition to buying coverage at a multiple of your income, you may want to add extra for anticipated college costs. No matter how young your children are now, if they're likely to attend college, that's a massive future outlay. Consider bumping up your life insurance by $100,000 for each child's college fund.
How will your family handle funeral expenses?
The typical cost of a funeral Opens in new window is between $7,000 and $10,000 — a big bill to cover if an income earner has just died. If you haven't factored this into your original total, you may want to increase your coverage to accommodate this cost. When it comes to funeral expenses, consider a type of coverage that will last your entire life, like universal or variable universal life insurance.
For more help to determine how much life insurance you may need, use Prudential's Life Insurance Needs Estimator.