How Much Life Insurance Do You Need?

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As an educator, you've chosen a path of nurturing a new generation. As an individual, you may have family members dependent on you financially. One of the fundamental decisions you should make is how much life insurance you should have to ensure your family can maintain their lifestyle in the event of your passing.

While your district may offer life insurance as a benefit, it's often not enough to provide financial security for your family and may not be portable between jobs. Therefore, buying supplemental life insurance in addition to any coverage through your district is an important consideration.

According to the IRS, the cost of employer-provided group-term life insurance up to $50,000 in coverage is not taxed. The cost of coverage above $50,000 is subject to taxes, reduced by the amount the employee pays for the insurance.

Q. How do I know what level of coverage is right for my family?

A. Everyone's situation is different. Some financial planners recommend buying enough life insurance to replace seven to 10 times your annual salary. An educator earning $65,000 a year with dependents might want to have a combined life insurance program between $455,000 and $650,000.  However, according to the Insurance Information Institute, basing life insurance on a multiple of salary doesn't take factors like inflation and goals into account.

You’ll also want to provide for your family’s immediate and ongoing expenses such as burial costs (averaging $4,000-$5,000, according to the California Funeral Directors Association), day care, tuition, college, mortgage and medical bills. Reassess your coverage as your family status changes with events such as marriage, divorce, domestic partnership or having or adopting a baby. You need life and disability insurance if there is anyone who depends on you for financial support, including an at-home spouse or domestic partner, young children or aging parents. Older couples may also need life insurance to protect a surviving spouse’s retirement savings.

If you don't have any dependents, consider whether you have a favorite charity to which you'd like to leave a legacy.

Q. Should you purchase life insurance for a nonworking spouse or domestic partner?

A. Purchasing life insurance for a nonworking spouse may also make sense for expenses such as child care, burial expense, housework and chauffeuring children that may need to be covered if the non-income-earning spouse or domestic partner passes away. This coverage is often referred to as Spousal Coverage and can extend to your domestic partner. For example, the CTA life insurance plan allows CTA insured members to apply for spouse/domestic partner coverage up to 50% of the members’ life  insurance amount up to $100,000 with proof of good health, or options up to $17,500 without providing proof of good health. For costs and further details of the coverage, including exclusions, benefit waiting periods, any reductions or limitations and the terms under which the policy may be continued in force, please contact Standard Insurance Company at 800-522-0406 or visit www.cta.org/thestandard.

Protect Your Family

Everyone’s situation is different. To help determine the level of protection that’s right for you, visit www.cta.org/thestandard and login using your member ID number. Read more about Term Life Insurance.

Next Steps

  • Determine your life insurance needs, using the CTA calculator or the general rule of thumb to purchase 7-10 times your salary.
  • Contact your employer to verify the amount of employer-provided coverage that is available and whether supplemental coverage can be purchased.
  • If additional life insurance is needed, visit www.cta.org/thestandard and login using your member ID number to learn about rates or obtain additional information.
  • Contact your credit union or other group affiliations to determine if they provide supplemental life insurance at low cost.
  • With term policies, pay close attention to whether the policy can be renewed.
  • If you decide to purchase an individual policy through an insurance agent, be aware that commissions are paid and should be disclosed.
  • Other resources for information include the Insurance Information Institute, and the California Department of Insurance.*

* Web sites provided for information only. No endorsement is implied.