Owner/Insurance Broker, KM Health Insurance Services, Hazel Crest, Illinois
This is a great question. The amount of insurance that a person needs is completely up to them. I have clients that want a low amount of coverage just to assure that they are buried properly and then I have clients that want half a million or more to assure that the house and cars are paid off and that the children are taken care of in the event of their death.
Those who need the greatest amount of life insurance are those who would have the greatest losses, numerically speaking, if they passed.
Persons with very high incomes would need a very high amount of life insurance to replace their income in the event of their deaths.
Owners of a highly valued business could purchase a very large policy to buy out the share of another owner who passes.
A son could take out life insurance on his father so that he is able to purchase his father's ranch when his father passes.
Of course, needing a great amount of life insurance does not make the need any more important than for those who need lesser amounts. Sometimes $10,000 can mean as much to one beneficiary as $1,000,000 can mean to another.
Co-Founder, Coastal Financial Partners Group, California
The amount of life insurance needed is really only limited by the income and assets being protected, insurability and the capacity to pay premiums. The maximum coverage most insurers will consider for someone under age 45 will be 25 times earned income. The earned income multiples grade down as you age. At older ages, net worth plays a bigger role in establishing maximum coverage.
As for who would "need" the most, consider that ultra high net worth individuals will continue to buy life insurance for estate planning purposes as their wealth grows to deal with estate liquidity issues. At some point, insurer retention limits and reinsurance capacity limits are reached such that the theoretical limit of US life insurance coverage on an eligible life is about $250 million.
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Persons with very high incomes would need a very high amount of life insurance to replace their income in the event of their deaths.
Owners of a highly valued business could purchase a very large policy to buy out the share of another owner who passes.
A son could take out life insurance on his father so that he is able to purchase his father's ranch when his father passes.
Of course, needing a great amount of life insurance does not make the need any more important than for those who need lesser amounts. Sometimes $10,000 can mean as much to one beneficiary as $1,000,000 can mean to another.
As for who would "need" the most, consider that ultra high net worth individuals will continue to buy life insurance for estate planning purposes as their wealth grows to deal with estate liquidity issues. At some point, insurer retention limits and reinsurance capacity limits are reached such that the theoretical limit of US life insurance coverage on an eligible life is about $250 million.