Insurance Planning, Part 1: How Much Life Insurance Do I Need?

November 03, 2020
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Insurance planning is one of the first areas I tackle when bringing on a new family and it is an area I revisit often. The reason? All the other planning and investing can be all for nothing if correct insurance is not in place. Saving 15% of your income will do you no good if you pass away suddenly or are disabled and unable to save.


When we talk about insurance, life insurance is often the first and most important consideration since many are underinsured. Research found that nearly half of all Americans have “insufficient life insurance coverage to address the financial needs of their family upon their demise”.1


As a rule of thumb, you need 8 to 12x your income if you have family dependent on your income. As you get older, the amount can decrease as your ability to self-insure increases by having more investments. We typically suggest that you get cheaper term life policies. For example, a 40-year-old with income of $100,000 should have $800,000 to $1,200,000 of term life insurance. 


Once you have insurance in place, you want to review several items regularly

  • Do you still have enough or too much?
  • Can your life insurance company still keep its promises to pay out benefits?
  • Beneficiary changes (to help ensure the money goes to the right people)
  • Potential cost-saving lifestyle improvements (like losing weight, quitting smoking, etc.)
  • Competitive quotes (because rates change every year)




Disclaimer:  Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized insurance, investment, tax or legal advice. We suggest that you discuss your specific situation with a qualified insurance, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. The views, thoughts, and opinions expressed in this blog belong solely to Alex Voorhees, and not necessarily to Reston Wealth Management. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing. You cannot invest directly in an index.