Your Family's Financial Safety Net: How to Calculate the Right Life Insurance Coverage

Du Charme Wealth Management Podcast

Life insurance seems straightforward until you encounter the barrage of influencers promising it's your ticket to financial freedom and market-beating returns. These misrepresentations have led many into financial disasters we've witnessed firsthand at our firm.
The truth is much simpler: life insurance creates financial protection when you're no longer around to fulfill your obligations. Like car insurance covers your vehicle, life insurance provides your beneficiaries with funds to continue life without your economic contribution. But determining the right amount and type requires thoughtful analysis of your unique situation.
We walk through a practical framework for calculating your needs – starting with outstanding debts (mortgage, student loans, auto loans), future expenses (education, childcare), and ongoing income replacement. Don't overlook the substantial economic value of stay-at-home parents, whose contributions often require significant funds to replace. And remember that inflation will erode your death benefit's purchasing power over time, making it crucial to account for real returns (investment returns minus inflation) in your planning.
For most people, term insurance provides the perfect solution – affordable coverage for when you need it most, allowing you to invest the difference elsewhere. Permanent insurance (whole life, universal life, indexed universal life) serves legitimate purposes in specific scenarios like estate planning for high-net-worth individuals, but despite aggressive marketing claims, these expensive products rarely make sense for average families.
Before purchasing any life insurance, particularly permanent policies, consider reaching out for a second opinion. The right coverage protects those you love without unnecessarily draining your current finances. Your financial plan should determine your insurance needs, not the other way around.
Timestamps:
[00:00:00] Intro
[00:03:20] Understanding Life Insurance Fundamentals
[00:06:40] Calculating Your Insurance Needs
[00:18:00] Real Returns vs. Inflation Impact
[00:27:15] Term vs. Permanent Life Insurance
[00:38:20] Legitimate Uses for Permanent Insurance
[00:49:10] Term Length Considerations
DISCLAIMER:
Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy, and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.