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The art and science of buying life insurance

Selecting a life insurance policy is both an art and a science.

The “science” part is easy, and very commonly used. To calculate the coverage amount, consumers typically use a formula that factors in age and income, such as 12 x income for under 40, 10 x income for over 40. Then they kind of fudge a bit on the coverage period, by doing some rudimentary financial planning. When will the mortgage get paid off? When will the kids be out of the house? When will we retire? They get a rough timeline of these events, and then pick the term or permanent product that pretty much covers them.

The “art’ part is harder. It incorporates the emotional component of the purchase. The consumer tries to put him or herself in the shoes of the surviving family. What will life be like for them when they suffer the devastation of losing a beloved spouse and parent? Will the surviving spouse want to leave work and be with the kids, so the family can heal together? Will the family need to relocate and start over? Will bereavement counseling be needed? Will other family members get involved, for comfort and support?

These are also questions that must be addressed. They are harder to translate into numbers, but it must and can be done. Life insurance is, after all, for the survivors.