Determining Your Life Insurance Needs

Ryan Smillie

September 5, 2019

Every situation is different and there is no blanket one size fits all formula to determine insurance needs but a good place for most individuals to start is by looking at:

• Net family income replacement needs: If you earn $100,000 gross annual income or $75,000 net income and you have 10 years until retirement, you can multiply the net income number ($75,000) by the number or years you have until retirement (10) to get a base coverage amount of $750,000.
• Total Debt: How much mortgage and consumer debt do you have? You want to make sure your family is not burdened with a large debt payment. In most cases you want your life insurance to be enough to pay off all debts and provide an income stream to loved ones. Ex. If you owe more than $500,000 on your mortgage you should probably have more than $500,000 in life insurance.
• Legacy and Estate goals: Do you want to leave money to pay for your child or grandchild’s education or maybe their first home down-payment? Do you want to give money to a special charity? Do you want to leave money to pay the capital gains tax on a family cabin?

In addition to the above, there are many factors that contribute to insurance needs including but not limited to current savings, age of family members, ability of spouses to earn income and tax liabilities.

Please contact Jon Glougie or Ryan Smillie if you would like to review your current coverage and needs.