The two-minute life insurance needs self-review.

An easy way to review your life insurance needs.

New York Life recommends that you review your life insurance once a year. Think of it as a checkup; preventive medicine to help maintain your family's financial security. The reason: needs change over time, sometimes more rapidly than people realize.

Fortunately, this review process needn't be all that complicated. To get a rough idea of how well your present coverage meets your needs, take about two minutes now to complete the following self-review.

Two-Minute Review Checklist

Check all that apply:

 My current life insurance coverage is less than seven times my annual income.

According to The Wall Street Journal: Complete Personal Finance Guide Book,the most basic method of estimating your life insurance needs is to ensure that your coverage is somewhere between five and 10 times your annual salary. Those who use this method will often split the difference and multiply their income by seven. So if you bring in $50,000 a year, you'd need about $350,000 of life insurance using this rule of thumb. Keep in mind, however, that this method is fairly simplistic and doesn't take into account specific insurance needs you might have, such as the cost of a child's college education or the continuing care of a special-needs dependent.

 My annual income has increased by 10 percent or more since I last updated my coverage.

A key purpose of life insurance is to replace lost income. If your current coverage is not in line with your needs, you could be exposing your family to risk.

 I have had a change in family status.

The birth of a child, death of a family member, marriage, divorce, or a child leaving home often indicate the need to adjust  your life insurance coverage.

 My spouse or I recently resumed or discontinued work.

Such changes create shifts in income and the need to review your plans.

 In the event of my death, my family would have an immediate cash flow problem.

One of the purposes of life insurance is to provide cash to help your family at the exact moment when it is needed most.

 In the event of my death, my family would have difficulty maintaining its current standard of living.

Another purpose of life insurance is to provide sufficient funds to enable your family to stay in the family home and continue its present lifestyle.

How much life insurance do you currently have?

Coverage of $100,000? $200,000? How about $400,000? That may seem like a lot, and it certainly is a good start. Consider, however, that it is your income stream, not your net worth, that provides the best measure of your family's standard of living. If your family lost your salary, how much money would it take to replace your income stream? Though the precise answer depends on interest rates and withdrawal amounts, you might be surprised at how much money would be needed.

For example, it takes $500,000 to provide your family with an income stream of $40,000 a year for a 20-year period, after which the entire amount is depleted.2 Similarly, $1 million generates $80,000 a year, once again with the entire amount consumed in 20 years.

 In the event of my death, my children's educational goals would be put in jeopardy.

According to the College Board, for the 2016-17 academic year, average annual prices for undergraduate tuition and fees were estimated to be $9,650 at public institutions and $33,480 at private institutions. Room and board were $10,440 at public institutions and $11,890 at private institutions.3

 We really haven't taken serious steps to explore other sources of retirement income to supplement Social Security and our employer-sponsored pensions.

If you're already in your 40s or your 50s, you need to start planning—and soon.

 We've been too busy to develop a plan mapping out how our estate should be distributed.

Estate planning goes beyond updating wills. With professional planning, you can make sure your heirs inherit the estate you worked hard to build.

Feel free to print out this work sheet to use with an agent at a later time. Or, if you'd like us to have an agent contact you, request an annual review with an agent by clicking on the 'Talk to Us' button.

Talk it through with an expert.

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Further Reading
  • 1 Jeff D. Opdyke, "Determining How Much Life Insurance You Need," WSJ.com. Adapted from The Wall Street Journal: Complete Personal Finance Guidebook (New York: Three Rivers Press, 2006).
  • 2 For illustration purposes only and is not representative of any particular product: Based on the assumption that the principal (starting amount) earns 5% in today's dollars, with principal interest to be depleted after 20 years by withdrawing an amount equal to 8% of the original principal each year. The example does not take into consideration any fees/expenses associated with investing or taxes.
  • 3 College Board, “Average Published Undergraduate Charges by Sector, 2016–17,” Trends in Higher Education.