Money Management

Over 100 million Americans don’t have enough life insurance coverage. Here’s why that matters, and how to fix it. 

Life insurance can be tricky: You want to get enough to cover your various expenses so your family can thrive, but you don’t want to get too much and overpay for coverage unnecessarily. As it turns out, the former is more of an issue than you might expect.

Here’s what to know about the millions of Americans who don’t have adequate coverage, and how to figure out how much insurance to buy.

106 million Americans are underinsured

A whopping 41% of Americans (or 106 million, roughly) admit that they don’t have adequate life insurance coverage, according to the 2022 Insurance Barometer Study conducted by the Life Insurance Marketing and Research Association (LIMRA) and Life Matters. (That can include people who need life insurance but don’t currently have a policy.)

Unsurprisingly, Gen Zers (49%) and millennials (47%), as well as women (44%), are more likely to report being underinsured.

That can be a huge missed opportunity since policies can come with additional benefits, like long-term care and disability riders. But it’s also setting up some families for serious financial difficulties. In fact, the same study showed that 37% of families say they would face financial hardship if the primary wage earner died within six months.

How to get adequate life insurance coverage

There are several methods you can use to calculate your life insurance needs.

HLV theory

The Human Life Value (HLV) theory says that your coverage needs equal a specific multiple of your annual income based on your age:

Adults up to age 40: 30 times their annual incomeAges 41 to 50: 20 times their annual incomeAges 51 to 60: 15 times their annual incomeAges 60 to 65: 10 times their annual incomeIndividuals over 65: 1 times net worth

So if you’re 40 years old and earn $120,000 per year, you’d need a $3.6 million policy. This is the formula that insurers use to calculate maximum coverages. However, it doesn’t specifically look at your individual needs, so it’s not the most accurate option. You may even end up over-insured, resulting in unnecessarily high premiums.

DIME method

The DIME method requires you to do slightly more legwork than the HLV theory. The acronym stands for debt (excluding mortgage), income, mortgage, and education. So, let’s say you have $10,000 in non-mortgage debts, you earn $150,000 per year, have $350,000 left on your mortgage, and one kid that you want to send to college (the annual average ranges from $26,000 to almost $56,000, depending on the type of school and as of the 2021-22 school year.) You’d need a policy value of about $524,000 to cover the debts, mortgage, and a four-year degree, plus your annual income multiplied by the number of years you’d expect your family to need that cushion.

Again, because of the relative simplicity of the method, it can result in a figure that doesn’t accurately reflect your needs. So it’s usually best to take a serious look at your finances and take the time to calculate all of these figures based on your age. (Life insurance calculators can help here.)

The best method to calculate your life insurance needs

Regardless of the method you choose, you should try to account for the costs of replacing your salary as well as additional costs, like funeral and burial costs, college tuition, and paying off your mortgage and other debts. But there are also more hidden factors, like replacing employer benefits such as health insurance and retirement contributions (including any match you get) that you need to consider. Plus, you need to account for inflation, which has averaged 2.5% per year based on Bureau of Labor Statistics data from 2012 to 2022. Then you need to deduct any assets that may provide income for your family, like Social Security benefits or existing retirement savings.

With all of those considerations, it’s no wonder that so many Americans are underinsured. If you find that your current insurance policy doesn’t cover your full insurance needs, you can buy an additional life policy while keeping your existing one in place, provided your total coverage falls within certain limits. That way, you can potentially bridge the gap, but still take advantage of the potentially lower rates that you got by buying your first policy at a younger age. And if you still aren’t sure how much coverage you need, talking to a financial advisor is a good option.

Of course, your circumstances can always change. So adding a life insurance coverage review to your annual financial review is an excellent way to make sure you aren’t falling behind as your life changes. After all, a life insurance policy is meant to protect your loved ones. And it’s important to make sure that it’s doing the job you need it to do.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Kirkland products are often high in quality. Here are some you may want to add to your shopping list. 

If you’re fairly new to shopping at Costco, you may not be so familiar with Kirkland products. So in a nutshell, Kirkland is Costco’s store or signature brand. You’ll find the Kirkland name all over the store’s grocery aisles, as well as on household essentials and even clothing.

Now, if you’re someone who takes comfort in the brands you know, you may be hesitant to give Kirkland a try. But loading up on Kirkland products could be a huge source of savings. So if you pick up these products this month, you may be doing a good thing for your personal finances to kick off the year.

1. Kirkland Signature Variety Snack Box, 51-count

We all need snacks that are easy to grab and take with us on the go. And Kirkland’s variety snack box fits that bill. For $32.99 online, you can snag a box of 51 individual snacks that include granola bars, trail mix, and roasted almonds and cashews. The theme among these snacks is that they’re a bit less heavy on sugar and more energy-focused. And at $0.65 per snack, it’s hard to beat the price.

It’s also worth noting that Costco products are almost always less expensive in-store than online. So you might run up a smaller credit card tab if you buy a mix like this in person.

2. Kirkland Signature Organic Quinoa

Quinoa is being hailed as the new super grain, and it’s versatile enough to go into a range of dishes. You could serve it warmed for breakfast with fruit or eat it cold in a mixed salad for lunch. Or, throw some grilled fish or chicken and roasted vegetables over it for dinner.

You can buy a 4.5-pound bag of Kirkland quinoa online for $10.99, bringing your cost to just $0.15 per ounce. At a local supermarket, your per-ounce cost might be three times as high.

3. Kirkland Signature Semi-Sweet Chocolate Chips

If you can’t remember the last time you baked cookies at home, then a 4.5-bag of Kirkland chocolate chips is probably not something you need. But since these chocolate chips have a decent shelf life, if you’re an avid baker, they could be a good buy — especially in January. People who live in cold weather climates often tend to hunker down more in winter, which could lead to more baking opportunities.

If you buy this sack of chips online, you’ll pay $13.99, or about $0.19 per ounce. At a local supermarket, you might easily pay more than $0.30 per ounce.

4. Kirkland Signature Wild Flower Honey

Winter tends to be the time when people catch a host of viruses and colds, which means a large supply of honey might serve you well. Honey has antimicrobial properties and might help your family feel better, according to the Harvard Medical School. Kirkland’s version will cost you just $17.99 online for a five-pound bottle, or $0.23 per ounce. You might easily pay 30% more at a regular supermarket.

5. Kirkland Signature Organic Pure Maple Syrup

There’s nothing like a batch of homemade pancakes on a cold winter morning with delicious maple syrup drizzled over the top. Unless you have your own tree to tap, you’ll be hard-pressed to find maple syrup at a lower price than Costco’s Kirkland version. A 33.8-ounce jug costs $14.99 online, which translates into a cost per ounce of $0.44. At a regular supermarket, you might pay almost double.

These are only five of many Kirkland products you’re likely to spot at Costco or Costco.com this month. It pays to take a look around and see which Kirkland items check off a need on your list.

Remember, buying Kirkland products at Costco is a very low-risk proposition. Costco is known to stand behind the items it sells. So if you buy a Kirkland product you aren’t happy with, rest assured that you’ll most likely be able to take it back for a full refund without a hassle.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Certificates of deposit come with unexpected benefits you may not have thought of. Read on for the CD benefits that might make them right for you. 

Certificates of deposit (CDs) come with plenty of obvious benefits. For one thing, when you invest in a CD, you can often earn a higher rate of return than you would even in a high-yield savings account. You’ll also have peace of mind, since you can buy FDIC-insured CDs. This means there’s really no risk your money will be lost.

But while most people are aware of those perks, there are also some little-known benefits you may not be aware of. Here are a few of them worth considering when you’re deciding if a CD is right for you.

1. Your CD can help you keep your money where it belongs

When you buy a CD, you typically have to commit to keeping your money locked up in it for the duration of the CD term so you aren’t penalized. This is often viewed as a downside of a CD compared to a savings account, since a savings account allows you to take money out whenever you want.

But, for some people, the fact that you have to leave your money in a CD is actually a perk even if it may not seem like it. If you aren’t great at managing your money and don’t have the willpower to leave your savings in the bank, you may be more likely to actually keep your hands off your funds if there’s a real financial consequence for not doing so. This can make accomplishing your goals more likely.

Let’s say you’re saving for a home down payment for a house you’re going to buy in a little over two years. If you choose a 2-year CD, you can’t get the cash out without a penalty until you’re ready to buy. But if you put your money in savings with no consequences for early withdrawals, you might be tempted to “borrow” from the down payment fund when you have something you want to buy — and perhaps not put the money back.

If you have a hard time resisting temptation, try stashing your money in a CD and seeing if that works for you.

2. CDs can provide a source of steady income

Because money in CDs has to stay locked up for the duration of the CD term, many people wrongly assume they won’t get any benefit from their certificate of deposit for months or years until the term ends. But that’s not necessarily the case.

Some CDs allow you to withdraw the interest that you are earning at any time without a penalty. Because of this, you may be able to buy a CD or two (or more) and receive regular monthly income interest from it that you can spend or do whatever you like with.

Barclays is one example of a bank that allows this. You can request a withdrawal of interest earned without any penalties on a monthly basis and can put the money into your Barclays savings account or an external account that has been verified.

Since your interest is guaranteed when you invest in a CD, the income you get using this approach is very predictable. If you need money you can count on coming in regularly, this is a major perk.

3. CDs allow you to take a very hands-off approach to investing

When you invest in a CD, your rate is guaranteed for the CD term. This is different from high-yield savings accounts, where your APY can change as market conditions shift.

Since you know exactly how much your CD is going to earn you and you don’t have to worry about that changing, you don’t really have to pay attention to this investment at all. You don’t have to watch for rate drops or worry about having to move your money to another savings account paying a better rate if your account terms change. And, unlike stocks, you don’t have to worry about losing your funds, either.

If you just want to put money into an account, not have to think much about it, and know it’s earning you a predictable return, a CD is a great choice.

These little-known perks may be just enough to convince you investing in a CD is right for you. Check out some of the best CD rates we’ve found to see if this investment is one you want to consider.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.

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Online banks often charge lower fees than brick-and-mortar banks and may pay higher interest rates. Learn why you might not want to give up local banking. 

Online banks are often a better choice for your bank accounts. Because they don’t have physical locations, they can keep costs down and often provide better interest rates and charge fewer fees than banks with physical branches do.

But while many people will find online banks work for them, this doesn’t mean everyone should switch. In fact, there are a few really good reasons sticking with a brick-and-mortar bank could be better for your personal finances in some circumstances.

1. You deposit cash a lot

Unfortunately, many online banks are simply not equipped to accept cash deposits. This makes sense, since they don’t have tellers you can hand the money to or their own ATMs that you can use to deposit the cash in an envelope.

While online banks do allow mobile deposits of checks, you’ll have to jump through a lot of hoops to get your cash into the account. This could include depositing the money into a different account and transferring it in via electronic funds transfer (not everyone can do this if they don’t have access to a different account).

So, if you regularly have cash you need to deposit into your checking or savings account, you may be better off with a brick-and-mortar bank so you don’t have to deal with a ton of hassle each time you want to deposit it.

2. You need in-person support

Not everyone is comfortable using online customer support, or even calling customer service on the phone. If you want to be able to go and talk with a banker to get help with your account, you’re going to need a brick-and-mortar bank.

Having a local branch to visit can be convenient when unexpected issues arise as well. For example, I recently needed to wire money quickly when my home sale was suddenly able to close after months of waiting. The amount I needed to wire was above my daily limit for digital wire transfers, so I had to make a same-day appointment with a banker to be able to get the money sent over and avoid delaying my closing.

This situation may not happen to you, but other financial issues could arise that you need to talk to someone about, and being able to do that face to face can sometimes just be better than trying to deal with problems on a computer or via phone.

3. You need a notary regularly

Many traditional local banks provide more services than you might expect. For example, several times when I have had to have documents notarized, my bank has done that for me for free. If I wasn’t a customer, this service wouldn’t have been available and I would have had to find and pay for a notary.

Your online bank isn’t going to have a branch you can visit if you need a notary to witness you signing something, so if you do this even a few times a year, maintaining an account at your local bank could be worth it.

4. You want a safe deposit box

Finally, if you have important documents to keep in a safe deposit box, you’ll need to find a bank that offers this. Some banks only allow customers to open safe deposit boxes, so you could be out of luck if you don’t have an account with one.

If any of these apply to you, a switch to an online bank may not be the right move. Just be sure that if your local bank is charging you any fees an online bank wouldn’t, that paying them is worth the perks you get. If not, there could be other financial institutions with physical branches that could offer these benefits without the downsides, so it’s worth looking into your options.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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