How Much Is My Life Worth?
The answer to that question can influence the financial safety of your family, and the ability of your spouse and children to maintain the quality of life your income (for now) enables them to enjoy. So, while it may seem unusual to assign a monetary value to your life, you need to ask yourself: How much is my life worth?
If you think this question is an unimportant hypothetical, if you do not consider the issue relevant to your family’s economic survival, then stop – and imagine how your wife or husband, as well as your son or daughter or your children, would be able to handle the onslaught of everyday expenses, credit card debts, mortgage payments, auto loans, college planning and tuition, and food, clothing, medical care and utilities without the salary you currently earn.
Life insurance companies have their own answer to this question, the one about your monetary value, which determines how much coverage you can buy.
The enclosed Premium to Income Ratio is a standard benchmark that life insurance companies use to calculate the amount of life insurance you are eligible to purchase.
The rules are the following:
- If your net worth is less than or equal to $5 million, the acceptable ratio of premium to income is
up to 25 percent.
- If your net worth is greater than $5 million, the acceptable ratio of premium to income is up to
- If your net worth is greater than $10 million, the acceptable ratio of premium to income is up to
These criteria shape the financial underwriting process.
Every life insurance company has a formula for the amount of coverage an applicant can buy, which we explain in detail (see below).
Other Coverage in Force or Pending with All Carriers.
You cannot stack life insurance policies, if you have open applications with multiple carriers it will typically get flagged in the underwriting process. A life insurance underwriter will see this material, and the underwriter will want a satisfactory explanation for this behavior. From the underwriter’s perspective, you may be hiding something (like a serious medical condition) or withholding other critical information.
Even if your intentions are not malicious, and you just want to try to get the best offer involving life insurance, you should not engage in stacking. Instead, you should work with an independent life insurance professional – an experienced agent – who will help you find the best life insurance company for your needs before you apply for coverage.
Reminder about How Much Life Insurance You Should Buy.
To repeat: When evaluating how much life insurance you should buy you can always use our life insurance calculator here, it will help think of the outstanding debts you need to resolve. Start by having enough coverage to eliminate your mortgage, which may be the biggest bill your surviving spouse will face. Ensure, through buying the right amount of life insurance, that there is sufficient replacement income – if you have a newborn child that number is 20 times your annual income – so the death benefits will cover the first 18 years of your child’s life, in addition to whatever educational expenses such as private school or college you want to include.
Remember, you do not – and you should not – approach this matter on your own because you are not alone. An independent life insurance agent will have the insight and intelligence to answer your questions, address your concerns and present you with unbiased information.
You have options, and you should explore them, thanks to the assistance an independent life insurance agent can (and will) provide. That way, you will know how much coverage you need to safeguard your family’s financial future.