If your family depends on your income, life insurance can be an important part of your financial foundation.
Life insurance is designed to help provide financial support to the people who rely on you if you pass away unexpectedly. In particular, it can help replace income, cover final expenses, pay debts, support children, protect a spouse, or preserve a family’s long-term financial plan.
Yet life insurance is often overlooked. According to the 2025 Insurance Barometer Study conducted by LIMRA and Life Happens, only 51% of American adults report having some type of life insurance coverage. Meanwhile, 40% believe they need more coverage.
At True North Wealth Management, we view life insurance as part of the bigger financial picture. The right amount of coverage depends on your family, your goals, your assets, your debts, and the people you want to protect.
The Role of Life Insurance
Life insurance can help create financial stability during one of life’s most difficult moments.
Depending on your situation, the death benefit may help your loved ones:
Pay funeral or final medical expenses
Replace lost income
Pay off a mortgage or other debt
Cover childcare or household support
Fund education expenses
Support a surviving spouse
Provide liquidity for estate planning
Protect a business or family-owned asset
The goal is not simply to own a policy. The goal is to make sure your coverage matches the financial responsibilities your loved ones would face if you were no longer there.
Rules of Thumb Can Be a Starting Point
You may have heard that life insurance coverage should equal five to ten times your annual income. Rules of thumb like this can be useful as a starting point, but they are rarely precise.
Two people with the same income may have very different insurance needs. One may have young children, a mortgage, and limited savings. Another may have grown children, no debt, and substantial retirement assets.
That is why a more detailed review is often more helpful.
A Better Approach: Detailed Needs Analysis
A more personalized way to estimate life insurance needs is to complete a detailed needs analysis. Specifically, this process looks at what your family may need, what resources are already available, and what gap insurance may need to fill.
A simple framework is:
Needs and obligations minus available liquid assets equals potential insurance need.
This does not replace a full financial review, but it can help you begin thinking more clearly about your coverage.
Step One: Identify Short-Term Needs
Start by estimating the expenses your family may face soon after death.
These may include:
Funeral and burial costs
Final medical bills
Credit card balances
Personal loans
Legal or administrative expenses
Emergency cash needs
Other immediate obligations
The right amount depends on your personal situation, but these short-term needs should not be ignored. Families often need access to cash quickly while they are also navigating grief and major decisions.
Step Two: Estimate Long-Term Needs
Next, consider what it would cost to help maintain your family’s standard of living over time.
This may include:
Housing costs
Food and utilities
Transportation
Healthcare expenses
Childcare
Insurance premiums
Household support
Retirement savings for a surviving spouse
Everyday living expenses
A helpful question to ask is: What would it cost each year for my family to continue living with stability and dignity?
For families with young children or one primary income earner, this number can be significant.
Step Three: Consider Future Obligations
Life insurance planning should also account for future expenses.
These may include:
College or trade school costs
Support for aging parents
Care for a child with special needs
A surviving spouse’s retirement needs
Business continuation planning
Estate liquidity needs
Major family goals you still want to fund
These future obligations can change over time. As a result, life insurance should be reviewed periodically—not purchased once and forgotten.
Step Four: Subtract Available Liquid Assets
After estimating needs and obligations, subtract assets that may be readily available to your family.
Liquid assets may include:
Savings accounts
Checking accounts
Certain investment accounts
Existing life insurance coverage
Other assets that can be accessed quickly and predictably
Assets such as a home, vehicle, or business may not be considered liquid because they can take time to sell. Additionally, they may be needed for the family’s ongoing stability.
For example, selling the family home may create cash, but it may also disrupt the surviving family’s standard of living.
Coverage Should Fit the Plan
Several factors can affect the cost and availability of life insurance, including age, health, coverage amount, policy type, and underwriting requirements.
Life insurance policies may also include expenses, mortality charges, surrender charges, and other costs. If a policy is surrendered early, there may be tax consequences. Any guarantees are based on the claims-paying ability of the issuing insurance company.
Before implementing a strategy involving life insurance, it is important to determine whether you are insurable. Also, make sure the policy fits your overall plan.
When to Review Your Life Insurance
Life insurance needs can change as your life changes.
It may be time to review your coverage if you:
Get married or divorced
Have or adopt a child
Buy a home
Start or sell a business
Change jobs or lose employer coverage
Take on significant debt
Experience a major income change
Begin caring for aging parents
Approach retirement
Have not reviewed your policy in several years
Regular reviews can help ensure your coverage still matches your responsibilities and goals.
Protect the People Who Depend on You
Life insurance is not only about replacing income. It is about helping protect the people, plans, and responsibilities that matter most.
At True North Wealth Management, we help clients evaluate life insurance within the context of their broader financial plan. That includes retirement planning, tax-aware strategies, estate planning, investment management, and family protection.
If you are unsure whether you have enough life insurance—or whether your current coverage still fits—schedule a conversation with True North Wealth Management.
A thoughtful review can help you understand your needs, identify potential gaps, and make more confident decisions for your family’s future.
Important Disclosures:
This material is for informational purposes only and is not intended as tax, legal, insurance, or individualized financial advice. Several factors affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, surrender charges and income tax implications may apply. Any guarantees are dependent on the claims-paying ability of the issuing insurance company.
1. LIMRA.com, 2025
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite and customized by True North Wealth Management LLC to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.