How Much Life Insurance Do I Need? test

Posted by: Leo Marte, CFP®, MBA | Jun 20 2022

Life insurance has been a widespread retail product sold to the American middle class since the 1970s. Insurance as a concept is much older than that and is a very complex topic. This article aims to explain how Christians can use life insurance as a relatively cheap way to protect your family, what kind of coverage you need, and how it supports your financial plan.

The Purpose of Life Insurance

Life insurance is a product that offers a guaranteed cash payout upon an insured’s death. Its purpose is to provide assets to cover what you or your spouse would otherwise make in income to provide for your family’s needs. You will likely pay a monthly or annual premium, and in exchange, you have the certainty of a (usually) tax-free lump sum payout that passes to your heirs outside of probate.

Life insurance replaces an income for a family if one of the breadwinners dies unexpectedly. Some individuals leverage it to leave an inheritance, which is not inappropriate, but not necessarily an approach we recommend. Business owners can also use it to cash out their current illiquid equity to their heirs and transfer the business to a partner or acquirer.

The following are typical uses of life insurance by the heirs who receive those payouts:

  • Final expenses (medical, hospice, burial, etc.)
  • Pay off outstanding debt
  • Fund a trust or college plans for children or grandchildren
  • Care for special needs children
  • Create a charitable endowment, scholarship, or one-time charitable bequest

Anyone with people in their life who depend on them in part or whole for their financial needs should have some form of life insurance unless they have accumulated enough wealth to essentially self-insure. It protects your loved ones and ensures they won’t fall on hard times if the worst were to happen.

How to Purchase Life Insurance

There are many types of insurance policies in the marketplace, and unfortunately, the financial services industry is notorious for unscrupulous salesmen and saleswomen who sell complicated and expensive products. The focus of this discussion will be around level-premium term life insurance.

Level-premium term life insurance is the purest type of insurance because it tends to have the lowest cost relative to other types. It provides a lump sum upon death in exchange for a level premium for the policy’s duration. The average term is ten to fifteen years but can go as high as thirty.

How much should I get?

That is the million (or more!) dollar question. There are many ways to calculate life insurance needs. As a Christian financial planner, I analyze various factors to determine the recommended size of a policy, including the monthly cost of living, potential expenses such as childcare, and income earning potential. It would be exceedingly tricky to break down that full analysis without understanding the individual circumstances, however, our Master Class How to Build a Christian Financial Plan includes examples and tools to help you determine the right policy fit.

When looking at options to purchase insurance, beware of employer-provided life insurance. Since you buy through a group, it may be too expensive to retain that policy if you change employers. You also run the risk of being ineligible or falling in a higher risk category later in life if you experience a chronic illness or other medical situations. That risk is why we recommend purchasing life insurance directly in the open market as the primary coverage before considering additional employer coverage.


Life insurance is essential to protect your family’s well-being should you pass unexpectedly. Starting as soon as there is a need, and hopefully purchasing a policy earlier in life can save you a large amount of money in premium increases over time. Each individual should look at various factors before engaging a broker to ensure the term, amount, and policy provisions align with their financial goals.

Leo Marte is a Christian financial advisor and CERTIFIED FINANCIAL PLANNER™. Abundant Advisors provides financial advice for Christians with convenient virtual meetings. Let’s talk if you are ready to make the next move.