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I had one guy tell me that I should have Term Life equal to ten times my annual salary. Yeah, right.

You need to qualify that...

Do you have a lot already saved? Does your spouse work? How old are your kids?

I would say, that for many people, ten times their gross annual salary is about right... Probably a better way to calculate it is 20-25 times the expenses you pay....

For example, say I make $100,000 a year... but have little saved so far... With a $1,000,000 life insurance policy, my wife will probably be able to pull $40,000 a year out of that money every year for the rest of her life...

Fairly close to the $50,000 or so I was contributing to the family expenses (Say $30,000 went to taxes, $10,000 to 401k, $10,000 for expenses for me alone - like my car, clothes, etc).

My family may have to take a small hit in their standard of living, but they'll be okay financially....

Seems like a pretty reasonable rule of thumb to me

Now, if the kids are gone, and there's enough already saved in retirement for the spouse to live on alone, there's not as much need for large life insurance policies.

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