The life insurance gap most households never measure
Five minutes with a piece of paper produces a better number than any online calculator, and most households have never done it.
By Meg Quillen, Cedar Landing Benefits
Ask a household how much life insurance it has and you usually get a figure. Ask how much it needs and you get a pause. The gap between those two answers is the only thing worth discussing.
Here is the arithmetic, which takes about five minutes.
Add up what the money must do
Outstanding mortgage and debts. Income to replace, multiplied by the number of years it must last. Education you intend to fund. Final expenses. Write each down; do not estimate a total.
Then subtract what already exists: savings, existing policies, and any group cover through work — remembering that group cover usually ends when the job does.
The remainder is the honest number
Most households find a gap, and most are surprised by its size, because group life cover of one or two times salary does very little against a twenty-year mortgage.
The good news is that term cover for the gap is usually cheaper than expected — and knowing the number means you buy the right amount rather than the amount someone suggested.
An estimate for planning, not a quote. Medicare and the Marketplace set your real figures.
Have a question this raised?
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