Quote:
Originally Posted by JDMDreams
How much should you spend on life insurance
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No hard and fast rule but I've seen two common ways of approaching it:
- 7-10x your annual salary
- Enough to clear your debts and to leave your dependents several years of income (or to fund things that you would have funded like your child's education)
This generally only applies if you have dependents though - if you don't have dependents you don't generally need life insurance (if you're famous you may want insurance regardless)
For example, when I bought my first house with my wife we bought enough coverage to pay off the mortgage (20 years, $800k, $933/yr) and when we had a kid I bought another policy (10 years, $800k, $768/yr) to cover lost income. I technically should have bought more when we bought our latest house as the policies didn't cover lost income and the mortgage anymore but in the 3 years since our investments have grown enough to cover lost income - if I had died in the first year or two of owning our new house it would have been a financial PITA for my wife and kid though (beyond me dying).
Reference:
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https://www.ratehub.ca/blog/how-much...nce-do-i-need/
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https://www.policyme.com/blog/how-mu...ance-do-i-need