How Much is Enough? Estimating Life Insurance Coverage Needs

Life insurance can be a tricky topic for many people, but it doesn't have to be. How much life insurance do you need? When do you plan on retiring? What types of life insurance can help you plan for your future, post-retirement needs? These questions and more are something everyone should consider. But you don't have to do it alone! You can reach out to your local life insurance professional for guidance.

So first, let's discuss who needs life insurance. If you have anyone who depends on you - a spouse, or a child for example - you need life insurance. Additionally, if you own any assets, such as a home, you need life insurance. Life insurance protects the assets you own, and it can also help provide for your family in the event that you were to pass away. While death is most certainly not an easy thing to consider, it's important to keep in mind that determining the life insurance package that's right for you and your family also can provide peace of mind. Life insurance is made to provide for your family after a death, and it's a way for you to ensure that your family is able to live their life to the fullest - even if you are not there physically to provide for them.

When considering how much life insurance is enough, the first thing to take into consideration is the type of life insurance you intend to purchase. Permanent life insurance usually runs from the time of purchase until the event of your death, regardless of your age. Term life insurance policies are usually more affordable, but only cover a specific time period - such as from purchase until the age of 65. Both permanent and term life insurance policies can also usually be customized to some degree, so your life insurance plan can fit your specific needs and budget.

There are supposed standard formulas to considering how much life insurance is right for you - such as buying coverage that equals eight to ten times your salary. But the truth is, every person's life insurance needs are different. For example, two people may earn equal salaries, but their individual needs, such as their financial assets, their debt to income ratio, their health, whether or not they have children, and more can all affect their life insurance decision. Plus, we all experience different pivotal moments in life - moments that can be monumental or subtle, but are nonetheless life changing. These pivotal moments, such as buying your first home, paying off your car, having your first baby, and more, can make a big impact on your life insurance choices.

One philosophy to determining the amount of life insurance you need is to assess whether you need extra coverage or add-ons to your chosen policy only after you project your life insurance needs in relation to four categories: final expenses, mortgages and other debts, education expenses such as college tuition for your children. and income replacement - or in other words, a monthly amount that your family could use until your significant other reaches retirement age. To clarify these life insurance components further, final expenses relate to how much you expect your funeral and any related expenses to cost. Some funerals cost a few thousand dollars, but costs can increase significantly depending on your wishes. Mortgages and any other debts is a fairly straightforward calculation, but college or education expenses can be more difficult to estimate - especially if your children aren't near college-age. And salary replacement can be tough to determine as well. While you can
certainly make your best estimate, it's smart to work with a life insurance professional to determine how much life insurance is right for you. After all, rather than take your best guess and buy a policy online, wouldn't you rather partner with an expert who understands the life insurance industry and perhaps more importantly, who understands YOU? Of course you would!

Another benefit of working with a life insurance professional to determine the right amount of life insurance coverage for you is that they can help you determine what your monthly premium amount will be based on the life insurance package you want to purchase. Your life insurance professional can also help you determine if you should buy one type of life insurance now and convert it to another type of life insurance policy later - and what types of life insurance packages are eligible for that type of conversion.

Determining how much life insurance can be challenging, but by following the basic guidelines we've set here and by working with a life insurance professional, you can determine the amount of life insurance that's perfect for you.


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Life insurance is not a matter of if, it's when. Your family is counting on you and you want to provide them with a bright future, no matter what. Our goal at Pivot is to provide you with the best life insurance policy to fit your specific family situation and financial goals. We want to be a partner that walks through all of Life's Pivotal Moments with you. Find out more at http://www.pivot.com