by Dana George

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You may be surprised by how much insurance this financial guru says you need.

Key points

  • Term life insurance is one of the easiest ways to protect loved ones after your death.
  • Term life is inexpensive and easy to buy.

If your income helps provide for the people you love, there is no question that life insurance is essential. Unless you have a huge pile of cash lying around somewhere, life insurance will allow your beneficiaries to pay bills after your death. The amount of life insurance suggested by financial advisors has changed through the years, and in fact, the answer is different depending on who you ask.

Financial guru Suze Orman caused more than a few people to clutch their pearls when she wrote that you should have at least 20 times your annual salary in life insurance. She went on to add that 25 times is even better.

What’s that mean for you? According to Orman, if you currently earn $75,000 a year, you’ll need between $1.5 million and $1.875 million in coverage. If you’re making $100,000 a year, that’ll be $2 million and $2.5 million.

Orman’s reasoning

Whether you love Orman or risk a severe shoulder injury shrugging every time you hear her speak, she does come at the life insurance issue with some solid reasoning.

Employer-provided insurance won’t last long

If your employer provides life insurance, it’s likely worth between one and two years of your salary. So, if you earn $50,000 annually, your employer’s policy will pay your beneficiaries between $50,000 and $100,000. While that money is likely to come in handy, it won’t last long, particularly if it’s the only insurance you carry and you were the primary breadwinner in the family. Once that money is exhausted, it’s up to your heirs to figure out how to cover the bills.

Term life insurance provides affordable protection

There are all kinds of life insurance products, but the most basic — and certainly most affordable — is term life. As the name suggests, term life insurance provides coverage for a specific “term.” As long as premiums are paid, coverage lasts until the term expires. Term life is typically sold in 5, 10, 15, 20, 25, and 30-year terms.

The average 25-year-old man in good health can buy a $500,000 20-year policy for $37 per month. For a healthy 25-year-old woman, a $500,000 policy would run around $31 per month.

The older you are when you purchase a policy, the more it will cost. For example, a healthy 45-year-old man will pay around $95 per month for a $500,000 policy, while a 45-year-old woman in good health would pay $75.

Still, if you break it down into weekly payments, a 45-year-old man will pay just under $22 per week for coverage, and a 45-year-old woman will pay less than $18 per week.

Not everyone needs life insurance

According to Orman, you may not need life insurance if you’re single and don’t have children. Unless you have someone who depends on your income to get by, life insurance is unnecessary. That said, keep in mind that the cost of buying insurance goes up with each passing year, so snagging a long-term policy while you’re young can pay off, especially if you plan to get married or have kids one day.

It’s never been easier to purchase a policy

Insurance companies have moved into the 21st century by allowing you to get quotes online and even purchase a policy from your computer. Most insurers do require a medical exam to make sure everything on your application matches up with the reality but will send someone to your home to check vitals and possibly draw blood.

In a world with few real bargains left, term life insurance just may be one of them. And purchasing term life means knowing that your loved ones will have money in their bank account after your death.

Life Insurance Protection for You and Your Family

While many varieties of insurance coverage are designed to help protect a person’s family and assets, life insurance is a vital type of protection. The right life insurance can help protect the people that depend on you the most if you should pass away. Choosing the right life insurance policy is critical to ensure your loved ones are protected properly. We have sorted through the various options to provide you with our choices for the best life insurance policies available today.


Dana George

Dana George

Dana has been writing about personal finance for more than 20 years, specializing in loans, debt management, investments, and business.