Aug 26 2008

Evaluating life insurance needs

One of the more unpleasant things about being an adult with responsibilities is considering life insurance.

Even though I know where I’m going after I kick the bucket, I don’t like thinking about it at my age. Still, it’s gunna happen someday, and the least I can do for my grieving family is to make sure there’s enough money for them if I take the early train outta town.

Shane and I are evaluating our income needs if we had to assume the worst. For him, I’d need to replace his income and we’d want enough to pay for our son’s college. For me, he would need to pay for childcare, possibly a maid service (I’d want that for him–one less thing for him to worry about!), and some money for our son’s college.

After crunching some numbers and factoring in inflation, we determined that we would need more than the 7-10x income amount that’s typically recommended. Ten times his income right now simply isn’t enough to cover everything.

So anyway, when evaluating your insurance needs, think about what you would need to pay for and see how much that would cost with inflation included. It could be more or less than you think.

I created an Excel worksheet to do my math, but I also found a handy calculator on My two figures came within $3k of each other, which is pretty good.
We already have some term policies in place, thanks to a group plan with Shane’s employer.
We’ll buy additional policies to make up the rest of the amount.

I got some quotes from (highly recommended by Dave Ramsey) and was surprised at just how cheap it would be.

For us to be fully and comfortably insured, it would cost an additional $30 per month or so. That’s it? We have enough wiggle room in our budget that we wouldn’t miss that $30 per month. Not a bad price for a bit of financial peace of mind, if the unthinkable becomes a reality.

We’ll go ahead and buy our policies as soon as possible, and then every few years or so (and when we know we’re going to have another child) we’ll reevaluate our insurance needs to make sure it still works.

9 Responses to “Evaluating life insurance needs”

  1. I have my husbands life insurance through our bank, we pay $13.50 and that includes $5,000 for my son and over $100,000 not sure the amount. When your son is born be sure to check out Gerber we bought our son’s and pay $69 a yr for his Be sure to figure in his SS I would bring home more than my husband makes now with his SS
    Good Luck

    Sonia’s last blog post..Monday Shopping

  2. Definitely not a fun thing. I am dragging my feet on this, but know I need to do it.

  3. People who have dependents (or who share a mortgage or other significant financial debt with someone else) need life insurance.

    I can’t think of a good reason for buying life insurance on a child. The products are unnecessary, overpriced and sold using scare tactics. (What if little Sammy is uninsurable later or if something happens to him?)

    The truth is that very few people are uninsurable when they first require life insurance, although I would guess that a lot of people subsequently become uninsurable (due to illness, lifestyle choices, etc.) at other points in their lives. Why waste 20 years worth of premiums? Invest that money for your child instead.

    Two key points when buying insurance are to only buy term insurance (and make sure it is renewable and convertible) and to always, always check to make sure you qualify for a new policy before you cancel any existing insurance. It doesn’t matter if you just want to switch to get a non-smokers discount or a lower premium, get approved first before you cancel the other policy.

  4. Hello,

    I totally agree that it is important to plan now for life insurance needs.

    My husband is older than I am by several years so it is really important to him that we plan for lots of insurance on him. It is just the acutal sitting do and making the arrangements.

    Thanks for the great post and your link to Zander. We have some from my job, but need to buy additional policies as well.

    Take Care,


  5. 10x income for coverage? Wow. I believe the math, but it sounds like the lead-in for a TV murder show :)

    That’s a *lot* of money.

  6. 10x your income is a lot of money if you make a lot of money to begin with :) We don’t. So 10x our income isn’t as much as you might think.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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