Do you have life insurance?

Most single people in their 20s and 30s don’t have life insurance… and I think that’s more or less fine. After all, life insurance is meant to protect your family in the event of your untimely death, so if you don’t have a spouse or kids, it’s not as much of an issue. However, as a DINK (dual-income no-kids!) couple, my husband and I decided that we both do need life insurance. Although, deciding how much was a bit tricky.

How do you decide? Well, I’ve seen a couple of useful calculators online that help determine this number. Basically, they get down to the fundamentals of what your significant other or children would need if you were gone. Here are a few key questions to ask:

1. How much would funeral / burial charges be? It’s not a fun topic to think about, but a necessary one, as these expenses can be quite hefty.
2. Do you need to provide income replacement?
3. Does your spouse work? If so, does their salary cover all of your living expenses? If not, you’ll need to fill in the gap to either give them time to find a job/better job or move to a less expensive living situation.
4. If you’re replacing your income, how much of it are you replacing? All of it or a portion? How much do they need?
5. Are there any large expenses coming up in your life that you need to cover? Are you undertaking any major home improvements or do you need to buy a car soon? If so, you may want to include that amount too.

You should also take into consideration any liquid cash you have (not investments). That means, basically, your emergency fund. How long will that last your partner? The bigger that number is, the less you probably need for life insurance.