How Much Life Insurance is enough?

The fundamental question of how much life insurance to buy can only be answered when we know what it is exactly we are protecting. While its purpose is to protect your life, only you can determine what that might be worth to your family. Your vision of a “good life” for you and your family doesn’t usually go away after you’re gone. If you are the “golden goose” that lays a certain number of eggs necessary each month to pay the bills and live a good life, it would be important to insure the goose for the value of all of the eggs it would need to lay for a lifetime.

 If it requires $100,000 a year right now to have a good life, how many years would your family count on for that income to continue? 20 years? 30 years? A lifetime?  We often see a personal finance magazine or hear a celebrity financial planning pundit recommend that people have enough life insurance to cover seven to 10 years worth of income. It would seem that they don’t expect for you to be dead for a very long time.

Determining how much life insurance to own is a serious matter requiring serious planning. Many people are given only one opportunity to get it right. The young person, who expected to buy more life insurance in the future and then develops a serious heart ailment, may never get the chance to buy what his family needs. People who have families to protect should always be insured to the extent of their Full Human Life Value realizing that what they might need to do that may not always be available to them.

Quantify Your Moments of Wealth

 In having the conversation about how much life insurance is enough, it is important to fully grasp just what is that we are protecting. Yes, we do end up with a number, but what does that represent? Some arbitrary income multiple, or is it all of the individual moments of wealth that we accumulate over a lifetime? A moment of wealth has nothing to do with money; rather it can be the small thing that happened today – an unexpected hug from your son, your daughter winning a special award at school, your spouse telling you how proud she is of you – that contribute to your overall well-being. People who take every opportunity to notice and record their moments of wealth have a much deeper sense of what is important to them and their families and it’s not just about a number. Through your awareness of your moments of wealth your protection planning becomes much more purposeful.