How much life insurance do we need?


Q. One of my New Year’s resolutions is getting together all of my finances. I’m married. I earn $90,000 a year and my husband earns $95,000 with a $10,000 bonus. We both have life insurance through work at two times our salary. How much more insurance do we need and what kind? Money is tight and we have credit cards we are paying off so we have to be careful with how much we are spending.
— Trying

A. The start of the new year is a great time to take stock of your finances.

The question of how much life insurance you need can be looked at in different ways, and the answer would be different for most people based on their goals and financial situation.

It’s a common question.

“In my opinion, replacing your human life value is smartest as that method would replace all your future earnings to retirement, assuming some reasonable increase each year, less your cost to the family — food, insurance, clothes, etc. — all put into a present value,” said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.

It’s a bit trickier than covering only your debt, such as a mortgage, student loans and credit cards, which is another way to make the calculation, he said.

You can also calculate what amount of money you’d need to maintain your lifestyle over some assumed remaining years, he said.

“In light of your circumstances, where money is tight and you’re actively paying off credit card debt, I suggest purchasing term insurance that has a conversion right into some more permanent type of plan should you eventually get to a financial position to secure lifetime benefits,” he said. “How many years to lock in, the benefit amount, which insurance company to apply to are all open questions best answered by a professional insurance broker.”

Gaelick said the insurance through your jobs certainly helps lower what you may need to purchase, but typically, company-sponsored plans are only in force for when you are actively working for that company. Leave the job and you might lose those benefits, so keep that in mind when you do your calculations.

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This story was originally published on Jan. 19, 2023. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.