Examine your income before taking life insurance

The value of your income is relatively easy to calculate: It’s the amount of money you earn, plus the amount of money you’d expect to earn if you hadn’t died prematurely. But this figure can be difficult to determine accurately. For one thing, many people have little idea of what they may be earning five years from now, especially younger people who may not have settled into a career yet. Secondly, more and more people change careers (not just jobs, but careers) numerous times in their lives. The average number of careers (again, not jobs) for people is now over five! How can anyone possibly say what his or her income will be in 15 years?
Your best bet when figuring the value of your income is to estimate how much your annual salary is likely to increase each year. When completing the worksheet in this chapter, use an increase of about 5 percent per year.
If you know your salary increases will be more than 5 percent per year, use the higher figure. If you know your increases will be less than 5 percent, use the lower number. You can round off later in the final formula when you determine how much life insurance you need.

Don’t forget that in five or ten years, you may quite possibly be working for a different organization or in a different job. If you underestimate your increases, you’re also underestimating the amount of income protection that your survivors need.