How To Find the Best Life Insurance Policy for You and Your Family

Financial advisor explaining paperwork to elderly retired couple front of desk.
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Life insurance comes in many forms, so it’s important to pick the right insurance for you and your family. Although sometimes life insurance can seem like an unnecessary expense, for most families it’s absolutely essential. One of the guiding ideas behind life insurance is to ensure that any large financial obligations are satisfied in the event that your family experiences a loss of income. So, the key to picking the right life insurance for your family is to analyze where your income comes from and what your large financial obligations are. Although every family’s situation is different, here’s a look at some of the most common uses of life insurance and how it can act as a safety net for your family.

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Primary Coverage: Breadwinning Spouse

The focus of most life insurance policies is on the breadwinner in the family, for obvious reasons. If a family loses its primary source of income, then the financial security of a family is immediately thrown into doubt. Life insurance can provide a relatively immediate source of funding to take care of a household’s monthly bills until a source of income can be restored.

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Secondary Coverage: Non-earning Spouse

Although there’s a clear need for insurance coverage for the primary breadwinner in a household, a non-earning spouse should usually be covered as well. Life insurance can help pay for services that used to be covered by the nonearning spouse, such as child care, cleaning or home maintenance. These services, which can often be taken for granted, are quite expensive when you have to hire outsiders. For example, according to the Economic Policy Institute, the average cost of infant care in California is $16,945 per year, or almost double the cost of in-state tuition at a public college. Professional house cleaning can cost anywhere between $120 and $300 in major cities across America.

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How Much Insurance Do You Need?

The specific amount of life insurance you buy will depend greatly on your specific financial circumstances, and you’re best served by discussing your options with a licensed life agent. However, there are some general rules of thumb you can use to approximate how much life insurance you might consider getting.

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Life insurance in general serves two main purposes: Providing a financial foundation to support your family for years to come and paying off any major debts so that your non-earning survivors don’t have to worry about them.

For the financial support portion of the equation, some pundits suggest simply multiplying your annual income by 10 to arrive at a life insurance amount. However, this should be tailored to your family’s specific needs and desires. If you want to provide enough insurance to cover your spouse for the rest of his or her life, along with your kids until they reach the age of majority, simply count up the number of years you want that money to last and multiply that by your annual income.

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For the debt payoff side of things, first add up all of your debts, including your mortgage, auto loans, college expenses and credit card debt, in addition to any other obligations. Then, subtract your existing liquid assets, including any existing life insurance such as you may have from your employer.

If you add up your income replacement needs with the amount you’ll need to pay off all of your debt, you should arrive at a ballpark figure for how much life insurance you might want.

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How To Find the Best Life Insurance Policy for Your Family

There are many kinds of life insurance, from term and whole to universal life insurance and more. The best policy for your family will depend on your needs and a cost/benefit comparison among the different types. Your employer may also offer group rates and varying levels of coverage. To find the best combination, analyze your income, debts and future needs and consult with a licensed life insurance agent.

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Last updated: August 4, 2021

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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