How Much Life Insurance Does Your Family Need?

Describe what you want the plan to accomplish

Write a short goal in your own words. “Give my spouse time to decide about the house” is more useful than “buy enough insurance.” “Set aside help for final arrangements” describes a different need.

Put the goals in order. If you cannot address every one at once, that order will help you ask better questions about the coverage you can afford.

Work from your household’s figures

The NAIC recommends looking at the financial needs that would continue after a death, including family support, education and a mortgage.

Bring your own figures to the conversation. For a housing goal, would you prefer to discuss a balance or a period of payments? For household support, what length of time are you considering? Write down the assumptions so you can revisit them.

Source: NAIC: Life Insurance Buyer’s Guide ↗

Give unpaid work a place in the conversation

Think about the work that keeps your household running: school pickups, meals, appointments or care for a relative. Ask who would do that work if your arrangement changed.

You do not need to assign an invented price to every act of care. Start by identifying what would need a new arrangement. If a cost belongs in your plan, seek a realistic local estimate instead of using a number from an advertisement.

Separate a planning example from a recommendation

For illustration only, imagine a family lists $60,000 for a chosen period of household support, $100,000 toward a housing goal and $15,000 for other planned expenses. Their listed goals total $175,000. If they decide $75,000 of existing resources can reasonably serve those same goals, the worksheet shows a $100,000 difference.

Those invented numbers demonstrate arithmetic. They are not typical costs, a suggested benefit or a quote. Your figures and assumptions may lead somewhere very different. Avoid counting the same mortgage expense both in household support and as a separate payoff goal.

Check what your existing resources actually provide

Read the benefit statements you already have. Ask what would be available to the people you are planning for and under what conditions. Do not treat a hoped-for donation as money already set aside.

Give each resource a purpose on the worksheet. If you intend to preserve a savings account for another need, say so. A total can look reassuring while still relying on assumptions no one has discussed.

Choose an affordable next step

Take the worksheet to an agent and ask what options, if any, address your priorities. Compare the benefit with the payment obligations and coverage period. Ask about anything that could limit the benefit.

Keep the worksheet with your planning records and review the assumptions when your responsibilities change. The aim is to make your next decision clearer, rather than to find a number that ends the conversation forever.