The Formula That Insurance Salesmen Hate for You to Know...
- Marc Lowe
- Oct 14
- 3 min read
Updated: Oct 17
After speaking with so many people about this topic. I find that, when most people think about life insurance, they start by trying to decide which type of policy to buy — term, whole life, or universal. But the more important question, in my opinion, is how much coverage you actually need.
It’s easy to just buy whatever an insurance salesperson is telling you but you have to keep in mind, their business model, which is a commission-based business, relies on selling more products to generate more income. There’s an easy acronym that I want you to remember next time you are thinking about purchasing Life Insurance. I will talk about the different types later on, as that is a topic for another day. For coverage amount, just remember the acronym LIFE — and, if you’re a business owner, there’s one more piece to consider.
L — Liabilities
Start with your total debt. That includes your mortgage, auto loans, credit cards, or business loans. If something were to happen to you, would your family or business partner have the means to pay these off?
Your life insurance should at least cover your outstanding liabilities so loved ones aren’t left with that burden.
I — Income Replacement
Next, think about the income your household relies on.
If your income disappeared, how many years would your spouse or dependents need financial support?
A common rule of thumb is 7 to 10 years of income replacement, but your specific number should reflect your age, dependents, and savings level.
F — Funeral Expenses
Final expenses can easily cost between $10,000 and $20,000 when you include burial, services, and other related costs. Including this amount ensures your family has immediate access to cash when they need it most.
E — Education
If you have children or dependents, consider future education expenses.
Whether it’s college or trade school, life insurance can help preserve those opportunities even if you’re not there to help fund them directly.
For Business Owners: Buy–Sell Agreements
If you own a business with a partner, your coverage needs don’t stop at personal protection. A well-structured Buy–Sell Agreement, funded by life insurance, allows your partner to buy your share of the business if you pass away — ensuring continuity for the company and fair compensation for your family.
Without this in place, ownership transitions can become complicated and financially damaging for everyone involved.
Bringing It All Together
By adding these components — Liabilities, Income Replacement, Funeral Costs, Education, and (for business owners) Buy–Sell Agreements — you can create a coverage plan that is comprehensive, practical, and truly aligned with your family’s long-term needs.
The right amount of life insurance isn’t about overspending on premiums or buying the biggest policy available. It’s about creating a plan that provides clarity, stability, and confidence for those who depend on you.
About The Author
Marc Lowe is the Founder & President of In The Money Retirement Planning. He is a Certified Financial Planner and member of NAPFA National Association of Personal Financial Advisors, XY Planning Network & Fee-Only Network. He works with retirees and those approaching retirement. He has over a decade of experience helping these folks grow their net worth, organize their finances and build better lives for themselves and their families.
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