Taking Care of Your Most Precious Assets - Your Family

Smart Solutions • September 2014

Have you checked your life insurance policy lately? Are you just married or a new parent? These types of life events are an important time to review your future financial needs. September is Life Insurance Awareness Month, making it a great time to review your coverage or consider enrolling in a new policy. In this issue of Smart Solutions, we guide you through your options and help you calculate the right amount of insurance to secure your family's financial future. It's one of the most important purchases you'll ever make!

We also provide tips to help with another complicated matter: managing finances for aging family members. Planning ahead now can ensure that their hard-earned assets are protected for the long term.

And remember — CommerceBank.com is always standing by to help you with your financial questions and banking needs.

Life insurance: How much is enough?

Just as no two lives are lived exactly the same way, there is no one-size-fits-all life insurance policy — or coverage amount — that’s right for every one.

For Life Insurance Awareness Month, we're putting a spotlight on this often misunderstood and underutilized safety net. In 1960, 72 percent of Americans owned life insurance. By 2010, that figure fell to 44 percent. And nearly half of those that do have life insurance don't think they have enough of it.1

One of the main reasons life insurance exists is to help your loved ones continue to maintain their current lifestyle in the event of your death. Determining the amount needed to do that depends on many factors, including your current income, your expenses and your children’s ages.

Here are some basic questions to consider as you choose the right type and amount of life insurance for your needs.

1. Term or permanent?
Term life insurance policies offer coverage for a fixed number of years and only pay out if the policyholder passes away within that time period.

Permanent life insurance policies, which include whole life and universal policies, are not limited by length of time. They include an investment component and protect you for your entire life, so premiums tend to be higher.

2. Who's dependent on you and for how long?
The ideal term length and the amount of insurance you'll need are largely based on what your survivors will need if you — and the income you provide — are no longer there. A young family with a new home may need to factor in mortgage costs and other debt, as well as childcare and education costs for the next 20 years or so. Empty nesters nearing retirement may need to factor in medical costs or any inheritance planned for loved ones.

3. How much would your survivors need?
For a ballpark calculation, multiply your monthly expenses by 12 to estimate the annual income required to cover those costs. So if your annual expenses total $36,000 and you want to cover a 20-year span, then you would need a minimum policy of $720,000.

Add another $10,000 to $20,000 to pay for funeral-related costs. In addition, think about possible future expenses that you may need to include. For instance, if you have one child now, but are planning on having more, your monthly expenses are likely to increase.

To get a more precise calculation of your insurance needs, use our Life Insurance calculator.

4. Remember: life changes, and so do your life insurance needs.
Once you've selected a life insurance policy, be sure to review it every few years to account for new children, new homes or new life situations.

Commerce Bank can help you follow through on your financial resolutions. Contact us today.

Interested in learning more?


  1. "5 Truths About Life Insurance That Will Surprise You," by Brian O’Connell, TheStreet.com, posted March 21, 2014, accessed July 31, 2014
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