Do You Have Enough Life Insurance?

In 2016, a survey by LIMRA found that two out of five US households have no life insurance protection. Of those who did have a life insurance policy, many expressed concern that they might not have enough. We'll address that in a moment, but first let's take a look at the reasons participants gave for enrolling in a life insurance policy:

• Cover burial and other final expenses
• Transfer wealth or leave an inheritance
• Help replace lost income
• Help pay off mortgage
• Pay home care expenses
• Pay estate taxes or create estate liquidity
• Supplement retirement income
• Tax-advantaged way to save and invest
• Provide funds for a college education
• Make a charitable gift

Depending on your situation, there might even be further uses for life insurance. But let's go back to the first question... Do you have enough life insurance?

Are you relying on a work policy? The face value of employer-provided policies is usually quite low, but another problem is continuity. If you lose or quit your job, you might lose your life insurance coverage also. It's important to ensure that your policy stays with you, no matter what else happens in your life.

Are you relying on a formula? One common formula estimates that you need insurance coverage equal seven to ten times your annual salary. That might work for some people, but a basic formula leaves many variables out of the equation. If you were expecting raises over the years, to offset inflation, you might want to include that in your calculations. Or, if your family has needs such as college education or childcare, you might need to add a bit to your final amount.

Truly, the best way to know if you have enough life insurance is to meet with a professional and conduct a needs analysis. We can help you identify all of your individual expenses and liabilities, and then together we can arrive at a final target amount for your life insurance policy. Don't try to guess or estimate such an important number; call us to schedule an appointment, and we'll help you decide how much life insurance coverage will offer the protection you need.