How Much Life Insurance Do You Really Need? | Personal Capital
Must be a valid email address.
Password must be 8-64 characters.
Must be a valid phone number.
Recession incoming? Here’s how you can prepare.
Daily Capital
Home>Daily Capital>Taxes & Insurance>How Much Life Insurance Do You Really Need?

How Much Life Insurance Do You Really Need?

People need insurance for many different reasons. Adequate insurance coverage, or lack thereof, can have a huge impact on your financial life and long-term goals. One of the most common – and most important – types of insurance people choose to purchase is life insurance. But it also brings up a lot of questions: Do I need life insurance for myself? What about for other members of my family? And how much life insurance do I really need?

September is National Life Insurance Awareness Month, so we wanted to take the chance to dive a little deeper into these questions.

Who Needs Life Insurance?

Life insurance analysis is an important step in ensuring financial protection if a death occurs in your family. The amount of insurance you purchase should cover cash flow needs, debts and other goals – such as ongoing expenses, funding education or retirement – in the event of death of a significant earner in your family. Because of these reasons, however, not everyone necessarily needs life insurance. Typically, single people with no dependents are less likely to need life insurance, people nearing retirement are generally less likely to need it, and those with a high level of net worth will likely require less life insurance needs except in certain estate planning circumstances. Talking to an advisor can help you determine your insurance needs

How Much Life Insurance Do You Need?

Once you’ve decided on life insurance, how do you know how much you really need? While everyone’s circumstances are unique, you should think through all the things that need to be taken care of if you or another household provider is no longer around. Another way to look at it is: if I died, how much would my spouse and/or dependents need to be ok? And if my spouse died, what would we need to be ok? Consider any of the expenses in your day-to-day life, including:

  • Replacing your annual income that covers daily living expenses for your spouse and dependents
  • Paying off a home mortgage or any other significant debt
  • Covering any consumer debt (credit cards, car loans, etc.)
  • Paying for childcare, including savings for future college expenses
  • Paying off unpaid medical bills or taxes
  • Creating an inheritance or providing extra retirement income with a tax-free death benefit

There is no “one-size-fits-all” life insurance policy, and covering all needs is not always what everyone wants. It’s best to do some research and think through what you would want covered if something was to happen to either yourself or a spouse. Talk to a professional to ensure you purchase the right amount of coverage for your family goals.

Read More: The Oblivious Beneficiary – Do You Have Unclaimed Life Insurance Money?

What is Personal Capital’s Life Insurance Strategy?

At Personal Capital, we model the effect of losing one or both wage earners on the surviving family’s savings and spending goals in our Monte Carlo-driven Retirement Planner, then we use that simulation to calculate the probable amount of current assets required to keep those goals on track. That amount (after subtracting current savings) gives us a better understanding of the amount of life insurance coverage that will be required to meet your goals.

Disclaimer: The information on this website is for informational purposes only and does not constitute a complete description of our investment services or performance. No part of this site nor the links contained therein is a solicitation or offer to sell securities or investment advisory services, except where applicable in states where we are registered, or where an exemption or exclusion from such registration exists. Third party data is obtained from sources believed to be reliable. However, Personal Capital Advisors Corporation cannot guarantee that data’s currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. All insurance analysis and insight provided is extended to you as a courtesy for educational purposes only. You should not rely on this information as the primary basis of your insurance planning decisions. We are not licensed insurance professionals. You should consult a qualified licensed insurance professional regarding your specific situation.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Amin Dabit is the Vice President of Advisory Services at Personal Capital. Amin brings over a dozen years of experience in private wealth management and financial planning. Amin leads Personal Capital's advisory team to identify and establish strategies for reaching clients' financial goals by providing comprehensive, customized financial advice designed to improve their financial lives.
Icon Close

To learn what personal information Personal Capital collects, please see our privacy policy for details.

Let us know…

This year, my top financial priority is:

Building my emergency fund
Paying off high-interest debt
Budgeting better
Saving for a short-term goal, like a vacation or new car
Increasing my investment contributions
Maintaining status quo - I’ve got this under control

Make moves toward your money goals with Personal Capital’s free financial tools.