Whether you qualify for basic life insurance through your employer or purchased standard coverage years ago and haven’t revisited your policy since then, it’s a worthwhile exercise to determine how much money your policy is worth and how long it might benefit your beneficiaries.
There’s no universal answer to this question. At The Ingram Agency, we believe life insurance coverage should reflect your income, responsibilities, financial goals, and the future you want to protect.
Start With Income Replacement
The primary reason many people secure life insurance policies is to replace income that their loved ones would otherwise lose. Consider how much your family depends on your earnings and how long they might need that money to thrive.
If you’re the primary breadwinner, your policy may need to provide years of financial stability for your surviving spouse and children. Also, remember that losing one person’s earnings can dramatically change the economic picture even in a two-income household.
Consider the Debts You Would Leave Behind
Life insurance can also prevent existing financial obligations from becoming a burden for your loved ones. Take stock of debts such as your mortgage, car loan, and credit card balance.
Depending on your circumstances, you may want enough coverage to pay these debts in full or provide your family with the resources to continue making payments comfortably.
Think About Future Expenses
Today’s financial responsibilities may differ significantly from the ones you expect to have down the road. For example, if you have young children, you may want your life insurance strategy to account for their potential college expenses. Your family may also need money for healthcare, home maintenance, and other services you currently pay for.
Don’t overlook unpaid caregiving work in these calculations. A stay-at-home parent may not bring home a traditional salary, but replacing childcare, transportation, household management, and other responsibilities could be prohibitively expensive.
Is Your Employer-Provided Coverage Enough?
Employer-sponsored life insurance is a valuable perk, but it may provide less protection than your family ultimately needs. Having a $50,000 policy through work can sound substantial until you compare it against a mortgage, years of lost income, outstanding debts, and future expenses.
Employer-provided coverage is usually conditional, which means changing jobs or leaving the workforce could affect your protection. Having an individual policy that you own and control, regardless of where your career takes you, is a far more holistic strategy that provides essential financial security.
Business Owners Have Additional Considerations
If you’re an entrepreneur, your life insurance goals should extend beyond providing for your family’s needs. Anticipate how your death could affect your business partners, employees, outstanding debts, and even your company’s ability to continue operating.
Life insurance can be a cornerstone of your business continuation strategy, including funding buy-sell agreements or helping your company remain solvent after you are no longer around to steer the ship.
Your Life Insurance Needs Can Change
Even if you were financially savvy enough to secure life insurance in your 20s or 30s, that coverage may prove to be insufficient to meet your needs a decade or more later. That’s why your insurance strategies should keep pace with your evolving financial responsibilities.
Consider reviewing your policy after significant life changes such as:
- Getting married or divorced
- Having or adopting a child
- Buying a home
- Starting or expanding a business
- Receiving a sizable raise
- Taking on substantial debt
- Changing employers
- Approaching retirement
Don’t Rely on a One-Size-Fits-All Formula
You may have seen advice that your life insurance policy should be equal to a percentage of your annual income. While that estimate can provide a realistic starting point, it cannot account for every facet of your unique financial situation.
A single parent with a mortgage and three young children has different needs than a childfree person with no significant debt. Likewise, small business owners and high-net-worth people may have considerations that go well beyond income replacement.
Build Coverage Around the Future You Want to Protect
Your life insurance should provide financial resources for the people who depend on you, but a standard policy might not be sufficient. The Ingram Agency’s experts will take time to understand your financial picture and personal priorities before recommending coverage. With access to multiple top-rated life insurance companies, we can help you compare term, whole, and universal life options and build a policy around your needs.
Whether you’re starting a family, growing a business, or wondering if your current policy is still enough, contact us to review your life insurance strategy.