Why Get Life Insurance

Life Insurance Needs: Making a Calculated Decision

Assessing your life insurance needs is a very important step, but it doesn't have to be a difficult chore. Each person or family will have unique situations that influence their life insurance needs. Luckily, you don't have to go at it alone - Protective is here to help you make a calculated decision around this necessary first step in getting insured.

The Importance of Assessing Your Life Insurance Needs

A recent study showed that four in 10 consumers aren't buying the life insurance they need because they don't know what they need and how much to buy.1 And for those who do have a policy, the study found that nearly one-third of consumers believe they need more coverage than what they currently have.

Life insurance is meant to protect the financial future of the people you love. For this reason, it's important to assess your life insurance needs and get the right amount of coverage, instead of simply guessing at how much you may need. Not having enough could leave your loved ones in a state of financial hardship, and having too much means that you'll be paying for coverage that you don't necessarily need. So how do you know what the right amount of life insurance is?

The truth is, every person has different life insurance needs and there isn't a single, one-size-fits-all magic number when it comes to knowing how much coverage you should buy. However, by using a formula that subtracts your total liabilities from your total liquid assets, you can better predict what your future expenses and income needs may be in order to determine how much life insurance you should purchase.

Examples of liabilities are:

  • Final expenses:  Funeral/burial costs, outstanding medical bills.
  • Debt: Mortgage, consumer loans, unpaid taxes, student loans, credit cards.
  • Future income for your beneficiary(s): A special needs child, care for aging parents.
  • Education funding: Tuition, room and board, books, and lab fees.

Example of assets and income are:

  • Liquid money: Cash in a savings or checking account.
  • Money in retirement accounts: IRA, 401(k) plan.
  • Investments: Stocks, bonds.
  • Income from other sources: Social Security, pension, real estate, dividends.

You might also want to consider any expenses that your spouse would incur if you weren't around. This could include laundry, childcare or lawn service. If your spouse would have trouble managing the work or paying for the service if you weren't around, you may want to consider it in your calculations.

Sounds like a lot of work, right? Not with the right tools. At Protective Life, we're passionate about helping you assess your life insurance needs the easy way. With our Life Insurance Needs Calculator, all you have to do is input some basic information, and our specialized formula does the rest. In just a few minutes, you should have a good idea of what your loved ones' financial needs will be when you die. This arms you with the information you need to get the right amount of coverage.

When you're ready to buy a life insurance policy, don't guess. Begin by calculating your financial needs. Once you're armed with this information, meet with a life insurance agent or company representative who can then help you find the right policy to fit your budget.


1. 2015 Insurance Barometer Study

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

How Much Life Insurance Do I Need

Whether you have already purchased life insurance coverage, or you are planning on getting insured, it's very important to assess your life insurance needs. Many families feel they do not have enough coverage should something happen. Calculating your life insurance needs is a step that doesn't need to be difficult. With Protective's Life Insurance Needs Calculator, simply fill out a few basic fields and our specialized algorithm will help you estimate how much life insurance you need to buy. For more information, visit the Protective Life Learning Center.

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