Myth: My life insurance only needs to be twice my annual salary

There was once a common belief that twice your annual salary for life insurance was enough, says John Romero, regional assistant vice president in Thrivent’s West Advisor Group. “But when you understand inflation, you realize there’s been a drastic change in what happens to the value of money over time. It loses its value much faster.”

Instead of following an old rule of thumb, Romero recommends that you do a real-time estimate of the amount of life insurance coverage you’d need to take care of your final expenses as well as provide for your family if something should happen to you. The number is different for everyone. Romero suggests an online calculator.

“Thrivent has a great life insurance calculator,” he says. “I also encourage people to google human life value calculator and do their own research.”

You’ll answer questions about how much money your family might need to cover daily living expenses, and for how many years you’d like those expenses covered. You’ll also calculate other needs, wants and wishes.

“We live our faith knowing every day could be our last day,” Romero says. “If I’m called home tomorrow, and I have children at home, do I want them to have the opportunity to go to college? And what about our mortgage? I want that paid off, too, so they don’t have to worry about where they will live.”

You also may have outstanding student loans, credit card balances or car loans. Childcare may be needed. Or you may want to leave a legacy of generosity to your church or favorite nonprofit organization.

“Would twice your annual salary cover everything you need and want it to cover?” Romero asks.

You may have a group life insurance contract through your employer that provides a benefit if you die. But what happens to that contract if you leave your job or you retire?

“Employee benefits are great,” Romero says. “But if you leave that job, you likely can’t take it with you. And if you’ve developed a health issue, you may not be able to get it on your own.”

Adequate life insurance coverage is something that many people don’t have the courage to talk about, says Romero. But it’s a necessary conversation.

“The right amount of life insurance truly is a lasting gift to not only your family but also your future generations,” Romero says.

Do you have enough life insurance to cover your final expenses as well as take care of your family? It’s time for an insurance check-up. Contact a Thrivent financial advisor.