Studies have shown that nearly thirty-million Americans are underinsured. This comes as no surprise, given many Americans’ only coverage comes as an employer sponsored benefit. Often, these benefits cover just enough to replace a year’s worth of income (or less). In the event that you are your family’s breadwinner, this amount will undoubtedly come up short in filling the shortfall and providing for your family.
Luckily, there are many available avenues to purchase life insurance in addition to what is offered by one’s employer. However, this leads to the big question of “how much insurance is right for me?” To help answer this question, there are numerous best practices we typically recommend to determine this number:
As the breadwinner, it is important to consider all of the support your income provides to those who depend on you – not just one year’s worth, but stretched out into the future. While there are no doubt various calculators available online to help calculate this number to the penny, ten-times your annual salary is a common shortcut to find a good place to start. Remember, this balance should help pay the living expenses of your family moving forward, so it is important to consider all the costs associated with running a household, raising a family, etc.
It is also important to consider large future expenses that might fall out of the “living expenses” category when determining the proper insurance amount. Some of the most common costs to consider in most households come in the form of mortgages, future education expenses for children or grandchildren, and final expenses/burial costs. Although these expenses might seem far off into the future, they should undoubtedly factor in when determining one’s appropriate insurance benefit.
Carriers in today’s marketplace have made it easier and quicker than ever to apply for life insurance. Some carriers in the right situation will even waive the exam and offer accelerated approval. If you do not think your current coverage adequately covers the items above, it might be prudent to consider additional coverage today.
In addition, if you would like to discuss any of the above in further detail or want any help forming your calculation, please reach me anytime at akuczera@capgroupfinancial.com with any questions you may have!
The above writing does not constitute investment advice, rather they are general guidelines and/or for informational purposes. Every individual has differing needs that must be evaluated and examined by financial professionals and tax advisors. For more information about The Capital Group Investment Advisory Services, LLC and our investment philosophy, including information on fees, you may request a copy of our Form ADV Part 2A from our team at RIAInbox@capgroupfinancial.com.
Securities offered through Purshe Kaplan Sterling Investments, member FINRA/SIPC, Headquartered at 80 State Street, Albany, NY 12207. Purshe Kaplan Sterling Investments and The Capital Group Investment Advisory Services, LLC are not affiliated companies.