Has Your Need for Life Insurance Changed?

Recent volatility and changes in the world of finance have probably affected your investment accounts and, quite possibly, the value of your real estate holdings as well. Have you considered that these changes may have increased your need for life insurance?

Impact on Net Worth
Many factors are at play when determining how much life insurance you may need. No single formula or rule of thumb can be applied universally. But, regardless of the methodology employed to calculate the amount of life insurance you need, your current assets and debts should be part of the analysis.

Like most individuals, you are probably relying on your investment accounts, in addition to other assets, to provide liquidity and cash flow for your heirs after your death. Unfortunately, market downturns can have a sizeable impact on asset values. That, in turn, can result in a shortfall in the total dollar amount you intend to pass on to heirs at your death. Increasing your life insurance coverage may be the most prudent and cost-effective way to make up for the shortfall.

What’s the Objective?
In assessing your life insurance needs, first consider what it is that you want your life insurance to accomplish. Think in terms of income. How much do you want to provide? Some individuals strive to generate an income sufficient to provide totally for their families. Others, however, determine that the goal is simply to supplement a survivor’s salary or some other income source. A neat tool can be found at that helps you realize what kind of coverage you need. This is not guesswork, your livelihood may depend on it.

The duration of a projected income stream also has a significant impact on the assets your survivors will need. Should the income continue until the kids have completed college? Or throughout your spouse’s lifetime? You’ll want to consider immediate needs, such as monthly bills, and one-time expenditures, such as paying off debt, in the analysis.