As your net worth grows, the primary purpose of term life insurance — replacing lost income and covering debts so your family isn't financially devastated — becomes less critical, since your accumulated assets can serve that same protective role. A commonly cited threshold is when your investment portfolio and liquid assets are large enough to fully cover your liabilities (mortgage, loans, etc.) and still generate enough passive income to sustain your dependents' lifestyle indefinitely. At that point, you've essentially "self-insured," meaning your family would inherit enough wealth to thrive without ever needing a death benefit payout. Is this crazy?
Is there a networth where having term live insurance doesn't really matter much?
byu/Standard-Top-5942 inInsurance
Posted by Standard-Top-5942
5 Comments
Sometimes I see people recommending life insurance equivalent to 20 to 25 times their annual salary. I would think that would also mean if your net worth exceeds 25 times your annual salary you probably don’t have much need for life insurance.
This is a r/personalfinance question and not a r/insurance question.
And it’s less about net worth and more about what the needs of your estate and loved ones are.
“passive” income net of inflation and taxes is best case like 1-2% of assets, so you need like $6 million per 10k of monthly expenses
if youre under 35, your income potential is still pretty high and term is really cheap so its still worth it
At the point which your dependents no longer need additional money when you die.
Afaik life insurance proceeds are not taxable and doesn’t go through probate. Family doesn’t have to cash out your stuff.