How Much Life Insurance?

There are many variables that should be considered to determine the appropriate amount of life insurance you and your family needs. The great news is that HFG advisors have a method to calculate an adequate amount, while considering all of the things that are important to you. Determining a life insurance need is something we do for our clients regularly. Since we do not sell insurance, we provide an unbiased recommendation of the appropriate amount. Below are a few questions that must be considered to determine an appropriate amount of life insurance:

  1. How much cash flow will your family members need per month or year and for how long? Will the family need an increase or decrease of income over time? It could decrease if children will be moving out of the house or if certain obligations go away. The monthly cash flow required could also increase for a period of time, possibly due to how the projected need compares to your current household cash flow.


  2. Will the surviving spouse work or continue to work? Will he/she take time off from work, and if so for how long?


  3. Is there a pension or another income stream the surviving spouse will receive immediately or in the future?


  4. Are there any debts you would like to be paid off? A car loan, mortgage, business commitment, or another obligation are things that you may want paid off. If so, these monthly obligations would not need to be included in the cash flow required in #1 above. Also, if there are any federal student loans, these are forgiven when the borrower dies.


  5. Are there children in your household? Social Security pays two kinds of survivorship benefits to family members of deceased workers. These benefits are temporary and not everyone qualifies for the benefit. The first survivorship benefit is for children until they reach the age of 18. The second survivorship benefit is for a spouse who is caring for a child as long as the child is under the age of 16. In order to determine the amount your family would receive, just log into your social security account at


  6. Do you have children attending college on the horizon? How many combined years of college expenses would need funded and what school will they attend? Between tuition and room and board, the total cost will need to be considered. Having money set aside for this goal, even if not for the entire bill, will help keep student loans to a minimum.


  7. What savings, investments, retirement accounts, and existing life insurance policies do you currently have to meet the obligations and goals of your family?

Once we have answered these questions, we are able to calculate the amount of insurance your family needs in today’s dollars to meet all of your future needs. If you have an adequate amount of resources and insurance already, then you can rest assured your family goals will be achieved despite an untimely death.

One last thing to consider is that your family’s need for life insurance is not static. The amount of insurance you need will possibly decrease over time due to two primary reasons:

1.) You will likely accumulate more wealth each year, and

2.) The surviving family will not require as many years of income and resources the longer you live.

Due to your family’s changing needs, it is good to re-calculate the analysis periodically. If you would like a review of your life insurance needs, we would be happy to discuss your goals and determine if you are adequately covered.



Legal Information and Disclosures

This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. HFG Trust has no duty or obligation to update the information contained herein. Further, HFG Trust makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is the possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. HFG Trust believes that the sources from which such information has be obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be coped, reproduced, republished, or posted in any form without the prior written consent of HFG Trust.