Consumer pricing and coverage concepts

Income Replacement

Income replacement is the goal of buying life insurance to replace the earnings a family would lose if the insured died. It is often a multiple of annual income.

Why it matters

A common rule of thumb is 10 times income, though needs vary. Younger families with children and a mortgage often need more. Term life is common for this goal because it is affordable for large amounts. A needs analysis gives a better figure than a rule of thumb. Use it as a guide.

Source: iii.org

Read next, for familiesTerm life insurance: how it works, what drives price, and when it ends

Where we use this term

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