Need to up the life insurance coverage based on a growing family. Currently have about $500k that is offered through my employer plus a $50k policy that my parents took out on me when I was young.

I'm seeing quite a few different thoughts or opinions on how much coverage I should need.

Family Situation:
-38M and 35F (wife)
-Married with one kid (16mo) and another on the way
-I am sole provider as wife is SAHM
-only debt currently is mortgage ($400k)
-debt situation likely to change next year as a new family car will be needed

What does the board think about amount of coverage needed for a situation like this? I recently spoke with someone who was recommended to me and he is suggesting $1.5M for me and $1.5M for my wife. Don't think I would need as much coverage for her.

Any recommendations on people/companies to work with?

Thanks and have a happy Thanksgiving!

20-25x your current gross income in a 20 year term policy for you

1/2 of that for your wife

If you're saving a lot of money, and you're healthy, I'd consider the idea of buying more insurance for a shorter term. Maybe consider a 3mm term for 15 years for example.

Ultimately you are truly protecting against the worst case which is if you die tomorrow.

Agree with idea that your wife needs very little insurance. Maybe none. Depends on if you would need money to pay for childcare if she passed. You'd still have your income coming in which I'd think you could use some of that to pay for those expenses.

Note: we're a fee only advisory firm. No commissions.

Lots of other factors to consider like your current net worth and an expectation of how much your wife and kids will need to live off of in the event of your death (or the death of your wife). There are some general rules insurance brokers and financial planners will throw around, but ensuring you or your wife can maintain your current lifestyle is probably what you are targeting.

I agree with the idea of staggering multiple policies periods. If you think your wife needs another $2 million today, but that need may decrease as your net worth continues to grow. So maybe you do one $1 million 10-year policy and another $1 million 20-year policy.

For your wife, it is much harder because it depends on whether you'd need to take a step back careerwise. Also consider what you'd need for childcare.

For you, I believe the general rule of thumb is 10x salary for a 20 - 25 year term life policy. For the wife, you'd need very little as you're not having to supplement her salary. Shop different policies and find the best for you.

For my wife and I, about 5 years ago we each took out 25 year policies $1.5MM on me and $750k on her. I also have a free policy through work that I believe pays out 2x my salary. We will never supplement with another policy as now our retirement savings and social security death benefits would supplement the surviving widow and/or child just fine.

Here's how we've approached this. We're self employed with about 80% of the revenue being tied to my client relationships and the other 20% coming from a niche service she provides to our biggest client. If something happened to me they would have to hire her onto payroll, they really wouldn't have a choice. From there we look at life insurance as a function of paying off the mortgage and enough in the bank that, with that job, she can maintain her current lifestyle from the residual on the insurance proceeds.

Extrapolating that to you, would your wife have to go to work and if so what is she worth in the job market? Daycare for two is a $2k/ month expense, which I assume you're aware of since she stays at home. So she has to have enough cash flow from residual in the insurance plus a job to cover the current lifestyle plus daycare.

It's not perfect but that thought process has always felt sound to me. That would mean if you got $1.5m she would pay off the house and new car and be left with $1m. If it paid her a reliable 5% she'd have $50k/year. Can she work for another $50k for $100k total and would that be enough?

For her I would want to pay off the mortgage and car then look to generate sufficient yield to cover that daycare bill. So maybe $1m on her which would put $500k in the bank. At 5% that pays the daycare.

Good luck.