How Much Life Insurance

There are over one hundred insurance companies that offer insurance in the State of Wisconsin. They all have specific strengths. Wisquote's job is to find strong competitive companies for your specific situation.

Whether you are in a higher risk profession (pilot, iron worker, crane operator, police or firefighter...) have interesting hobbies (scuba, sky-diving...), have a health condition (diabetes, remission from cancer, high blood pressure, arthritis...) or have some other risk factor, such as smoking, finding a company that can underwrite your case at a good rate is important. Companies that insure many people who have similar characteristics can afford to reduce their rates as they diversify their risk. While every company won't insure every type of person, there are many that have niches that might apply to you. Finding those companies is a key to finding you the right policy.

Our core agents have helped hundreds of people obtain life, health, disability, long term care and medicare supplement insurance. That experience enables us to work with each other to find you the plans that best suit you.

Determining how much life insurance that you need is the core exercise in implementing a plan of protection. A main consideration is how much income will be lost and your family will need to replace if there is an early death. You will also evaluate whether there are one time needs to be paid for. Finally you will consider how much financial protection, via assets and other life insurance that is already in place.

It is very important to purchase the amount of life insurance that you actually need. Do not cut the death benefit to reduce premium. The second worst thing that can happen to your family if there is an early death is to be short on cash and on a loved one.

If you have budgetary concerns, shorten the term length of your life insurance contract, as that will reduce the premium. The longer the term length the higher the premium. A 10 year term plan will cost roughly half what a 30 year term plan costs. You can always lengthen your life insurance protection later by changing your plan premium (you will be able to afford a little more premium in ten years most likely) and details (ten years later you might need less insurance) if you need to. Of course, if you can afford a longer plan today, it is usually best buy that plan and lock in your rates.

Here is a simple formula for determining how much life insurance you need:

Determine how much income that would need to be replaced if there is a death.
Divide that amount by a rate of return on investment that is assumed to be fairly safe to achieve to come to a base level of death benefit needed. Wisquote uses 5% for people who need the money to last longer than 30 years, 8% for people who need the money to last 20 to 30 years.
Add any one time needs, i.e. college education funding, paying off a mortgage.
Subtract any usable assets or life insurance that you control (some life insurance at work is not able to be kept if you lose your job).

Here is an example:

John, 30 and Jane, 29 are both employed and earning similar amounts. They have two children both under the age of five. If either person dies, the other will need to replace an income of $50,000 net of taxes to maintain the family's standard of living. $50,000 income to be replaced
John and Jane determine that due to their employability, youth and the age of their children that they need to replace a lost income for between 20 and 30 years. Divide $50,000 by 8% which comes to a death benefit (or investable principal) of $625,000
John and Jane have a $200,000 balance on their mortgage and want to have $50,000 as a base for each child's education. Add $300,000 of death benefit
John and Jane both have about $50,000 in retirement assets. John has a $50,000 life insurance policy at work which he can keep if he is no longer employed there. Jane has a $100,000 policy at work which she can not keep if she is no longer employed there. For John subtract $100,000. For Jane subtract $50,000.
So for John, he needs a total death benefit of $625,000 plus $300,000 minus $100,000 equals $825,000. For Jane, she needs a total death benefit of $625,000 plus $300,000 minus $50,000 equals $875,000.

This process and these examples are for people in their working years. If you are more concerned with replacing a pension income or providing an inheritance read our appropriate articles.

Click here to estimate the amount of life insurance you need using a calculator from one of our underwriting partners.