Income Protection

When you're trying to find a policy for income protection, it can feel overwhelming. We make the process super simple. The type of income protection you're looking for depends on where you are in your life.

Income During Working Years

If you're younger and still working, then you're usually looking for a term policy that just lasts during your working years. Let's look at a few different ways you can determine the amount of coverage you will need.

Determining Coverage Amount While Working

  • A multiple of your income.
    There are a lot of financial advisors that recommend an amount of coverage based on multiplying out your income. Usually this varies based on your age. How you figure out your multiple is based on the amount of money that you anticipate making over the course of the rest of your life. This option is for people that are looking to replace a lifetime of income for their families. The most often multiple is 10 - 20 times your income. For example, if you're making $40,000 per year they might recommend $400,000 - $800,000. These recommended multiples can be as high as 50 times your income. Insurance companies will often set multiple limits on term life insurance for the amount of coverage you can get. These limits depend on your age. The younger you are the larger a multiple you can get.

  • Expenses
    This is simple. You can either calculate this amount based on income, but I recommend clients calculate this multiple based on the income that needs to be replaced. For example, if you have a 30 year mortgage, a 5 year car payment, and kid's tuition, and bills that add up to $30,000 per year and you'll need to have that income for 20 years then you need $600,000.

  • Don't Forget the Stay-at-home Parent!
    I've never spoken to a client that considered this, but it's wildly important. Anytime there's a stay at home parent, or even a parent that works part time in the household, people underestimate the risk of the death of that parent. The breadwinner might still be earning an income, but they'll often need help around the house or cost of child care covered in addition to burial expenses. Stay-at-home parents need a minimum of $100,000 in coverage while kids are at home and possibly longer. This is especially important if the stay-at-home parent helps the income earner make money. Many people own businesses and are dependent upon the stay-at-home parent to work for the company. In this situation an employee will need to be hired to take on the extra work load. The best way to calculate this number is to calculate the amount of money you would need to spend hiring out this work.

  • Actual Costs
    This is often most common, but the option I warn people against the most. For example, many people will add up their debt. Maybe you have a $100,000 mortgage, $20,000 car loan, and figure you'll need $30,000 for a funeral. You could add that up and get a $150,000 policy. The sad part is you might be overlooking future expenses your family might have like living expenses or time to adjust to a new lifestyle.

  • A Recommended Number from a Life Insurance Site
    This is the worst option of all because there's no personalization on the coverage amount. Often random life insurance websites will toss out random numbers like $250,000 or $500,000 in coverage because those are easy numbers to qualify for. Just because it's easy for the website, doesn't mean it's the right number for you. You don't pay anything extra to work with our team. Why not get professional, personalized advice for your particular situation? The one thing we've learned from all of these no-agent websites is that clients are not getting the amount of coverage that they need. The worst is when an agent relies on these sites and simply sends their clients to a site to save them the real work of helping you calculate the amount of coverage you need.

Final considerations for working years: The lower your income the more life-saving this money is when a member of the family passes away. I've never had a family member tell me that their policy was more money than they needed. These numbers can seem large, when you break them down on an annual basis they really are not. You likely need more than you think. If you have questions about the amount of income you'll need, then reach out to our team and get some help. What ever you do, get something to help cover the expenses you know your family will need.

Income for Retirement Years

Even if you've retired you are still dependent upon your retirement income, especially if that income is from Social Security! We hear stories all the time of clients that were forced into unfortunate circumstances because they did not have a replacement source of income. Think about it. If you're living from check to check and you lose an income due to death, you'll need to replace that money for a season. We all have rising costs of living and retirement income should be protected.

For our retirees we recommend retirement income replacement for life and the amount you can get will depend on health. These situations can be incredibly delicate and there is no real formula. We recommend reaching out to our team to find the best solution for you.