Income
If Your Income Stopped Tomorrow, What Would Your Family Still Need to Pay?
4 min read
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Income replacement
Most households run on a paycheck. Income replacement is a way of sizing life insurance around the income your family would lose, so that rent or mortgage, groceries, childcare and ordinary bills can continue for a period of time. The starting point is your household budget and how long people will depend on you, not a product.
Cornerstone Capital is an independent life insurance brokerage, not an insurer. Carriers make underwriting decisions, and approval is never guaranteed. This form does not apply for coverage.
01The problem
A household is a set of monthly commitments that assume the income continues: housing, food, childcare, a car, insurance, tuition. When an income stops, every one of those keeps going.
The gap is the monthly shortfall multiplied by the number of years someone would need help. Most people have never worked out that number, and a multiple of salary is only a rough stand-in for it.
02The tool
It is not a type of policy. It is a method: add up what the household would need each year, for how many years, subtract savings and coverage already in place, and size a death benefit to the difference. Term insurance is the usual tool because the need usually ends.
03The mechanics
There is no single formula that suits every family. A useful estimate looks at the income to be replaced, the number of years it is needed, debts to be paid, and future goals such as education, then subtracts savings and coverage already in place.
Rules of thumb based on a multiple of salary can be a starting point, but they ignore your actual expenses and timeline.
A parent who is not earning a paycheck still provides care, transportation and household management that would cost money to replace. Coverage on that parent can be part of an income replacement plan.
Employer group life insurance is a useful benefit. It is often limited to a modest multiple of salary and may end or change when employment ends. Depending on the plan, you may be able to continue or convert it, often at a higher cost.
Many households treat group coverage as a supplement and own a separate policy that does not depend on the job.
Term insurance is commonly used because the need usually has an end date. Some families layer policies of different lengths so coverage steps down as children grow and debts shrink. Permanent coverage may be considered where part of the need is lifelong.
What you may have heard
I have life insurance through work.
Ten times your salary is the right amount.
Concept names decoded
Names you may have heard for what is on this page. Open one to see what it is and what it does not promise.
Questions to ask
Questions to ask
04Trade-offs
05Fit
We are an independent brokerage, so we can look at more than one carrier, subject to appointments, product availability, licensing and eligibility. We ask about your situation first and explain the trade-offs. Keeping what you have is a fine outcome.
Important to know
Any coverage amount discussed is an estimate based on information you provide. It is for education and is not financial, tax or legal advice.
Premiums and eligibility are determined by age, health, underwriting and the criteria of the issuing carrier. Approval is never guaranteed.
Cornerstone Capital is an independent brokerage and can evaluate options from multiple carriers, subject to appointments, product availability, licensing and eligibility.
Next step
Household, income range and how many years you would want covered. A licensed broker works the estimate with you before recommending anything.
Or call (501) 476-1468