Life Insurance: Calculating What You Need with Cody Stansell

How Much Life Insurance Do I Need?

Death and taxes may be inevitable but understanding exactly how much life insurance you need doesn't have to be complicated. In this eye-opening episode, Senior Wealth Advisor Cody Stansell cuts through the confusion to reveal a refreshingly practical approach to life insurance.

Most people have been sold the idea they need permanent life insurance, but Cody challenges this conventional wisdom with a more strategic perspective: "We want life insurance to be a bridge until you are self-insured." This fundamental shift in thinking transforms how we approach coverage decisions.

Cody walks through the four most common scenarios where life insurance becomes essential. Beyond the obvious case of income earners with dependent families, he explains why stay-at-home parents need coverage despite not earning traditional income. Using personal examples, he illustrates how the passing of his stay-at-home wife would create significant financial pressures through childcare costs and potential income reduction during the grieving period. He also explores scenarios for those supporting aging parents and business owners needing succession planning.

The episode dismantles popular misconceptions, particularly the "insurance for life" approach that permanent policies promote. For the vast majority of people, term life insurance provides appropriate coverage during wealth-building years until their accumulated assets can sustain their family's lifestyle without insurance. For single individuals without dependents, Cody offers the liberating advice that they likely don't need coverage at all – contradicting what commission-based insurance agents typically recommend.

Whether you're just starting your financial journey or reassessing your current coverage, this episode provides the clarity needed to make confident decisions about protecting what matters most. Take control of your family's financial security by understanding exactly how much coverage you need – and for how long.

To learn more about Stansell Wealth Planning visit:
https://www.StansellWealth.com
Stansell Wealth Planning
5550 Granite Pkwy, STE 270
Plano, TX 75024
469-606-2040

Episode Transcript

Speaker 1 (00:04):
Welcome to the Steadfast Wealth Planning
Podcast, where faith andfinancial wisdom come together.
Hosted by Cody Stansel, ownerand senior wealth advisor, we
provide comprehensiveChristian-based financial
planning to help families,individuals and business owners
build a life they're proud tolive.
From investment management andtax planning to preparing for

(00:25):
retirement, we're here to guideyou with clarity, integrity and
purpose.
Let's get started.

Speaker 2 (00:37):
Life insurance isn't a one-size-fits-all.
Cody Stanzel breaks down how tocalculate the right amount of
coverage based on your family'sneeds, goals and future plans,
so you can protect what mattersmost.
Welcome back everyone.
I'm Sophia Yvette, co-host andproducer, back in the studio
with Cody Stansel, senior WealthAdvisor for Steadfast Wealth

(00:58):
Planning.
Cody, how are you today, hey?

Speaker 3 (01:01):
Sophia, I'm doing well in my neck of the woods.
It is softball season for mydaughter.
I have a third grade daughter.
I'm her head coach.
Our first game is coming upthis weekend, so we're excited
about that, hopefully to avoidsome rain and get the season
going.
So we're excited.

Speaker 2 (01:19):
Awesome, awesome, yeah, very, very exciting, and
it's exciting to have you backon today.
Now, cody, this is a questionnearly every family asks at some
point, and I'm sure you'veheard it a million times how
much life insurance do I need?

Speaker 3 (01:35):
Yes, great question.
The two inevitable things,right?
Death and taxes.
And, lucky for you, we'reprofessional in both and we talk
about both.
Right?
So we've talked taxes before.
We'll continue to talk taxesdown the road, but today is

(01:56):
death.
Yeah, riveting topic Lifeinsurance, all joking aside, is
a very sensitive topic, right?
Having a conversation around itis awkward because we are
talking about death and a lot ofinsurance companies and
commercials use it to tug onyour heartstrings in order to
sell it, don't you love yourfamily?
You better have more lifeinsurance.
You know those kinds of things.
So it's kind of used as asalesman's trick almost, and you
know that's not good.

(02:16):
It's also hard to talk aboutbecause you never want to
benefit from it, right, if youthink about it, it may be one of
the only things that you'd beglad to pay for and never use,
right?
Just because you don't want thealternative.
Our view is we want lifeinsurance to be a bridge until
you are self-insured.
So think of that phrase andI'll repeat it life insurance to

(02:40):
bridge you until you areself-insured.
A lot of clients think thatthey should always own life
insurance.
We want you to have theadequate asset base is what we
call it, whether that'sretirement accounts, investment
accounts, bank cash, any otherassets you own like a house, we
want that, once you add it allup, that asset base to be large

(03:02):
enough that, if God forbid youpassed away, it would be able to
sustain your lifestyle withoutan outside source like life
insurance.
So I'll repeat it we don't wantyou to own life insurance for
the rest of your life, but ofcourse there is a period in time
that you do need life insurance.
So hopefully that summarizeswhat we're all about and makes a

(03:22):
little sense.

Speaker 2 (03:24):
Most definitely.
Now, Cody, let's get intothings a little bit deeper.
What are the key factors youconsider when helping someone
determine their coverage amount?

Speaker 3 (03:35):
Yes.
So their situation in life?
Right.
So I'll back up a little bit.
What is life insurance for inthe simplest terms?
Think income replacement.
So it is replacing an income.
So if you buy a million dollarsin life insurance and you die,
your beneficiaries will receivethat $1 million from the
insurance company in a couple ofmonths, right?

(03:57):
And so there's different typesof people with their situation,
how much they need, how longthey need it.
Those types of things, the fourmost common types of people
that we see.
First one if you earn an incomeand someone is dependent on
your income, right, that's themost basic case.
For example, you're married,you have a couple of kids, your

(04:18):
family depends on your incomeand if they would struggle to
pay the bills without yourincome, there you need life
insurance.
Right, that's the most commoncase.
Another one is a stay at homeparent, where, if the expenses
of the household would increaseor any kind of income would
decrease if you passed away Forexample, my wife.

(04:40):
She stays at home.
We have three kids under eightyears old.
Like God forbid, if she passedaway, you better believe I would
need some help from family.
A nanny, whatever it may be,cooking, cleaning, taking care
of the kids, taking them topractice some of those things,
and realistically, I would wantto take time off work to grieve
during a very dramatic time inour life and try to figure out

(05:03):
what's the best next move andjust take some time right.
And so my income would probablydecline during that period.
So even though my wife doesn'thave a high income earning, we
need life insurance on her, justin case you know, god forbid,
she passed away.
So that's the second most typecommon type of client that we

(05:23):
see need life insurance.
Third one is any other timesomeone relies on your income.
So very similar to the firstexample, but here's a little
twist.
I have a client she's in herlate forties and she's taking
care of her mother physicallyand financially.
Well, if something happens tomy client, how would mom pay for

(05:44):
her assisted living bills andpay the bills right?
And so my client needs lifeinsurance on her life where her
mother is the beneficiary right,because, God forbid, she passed
away.
Mom needs some financial help.
So it's not just for thegeneration right below you, it
could be for a generationlaterally or above if they
depend on your income.

(06:04):
And then the fourth type ofclient that we see the most is
if you own a business, that ifyou weren't around, someone
would need to buy out yourownership in.
So, for example, I have lifeinsurance where my business
partner is the beneficiary right, because if I passed away, this
lump sum of money would go onto him so that he could have

(06:24):
enough capital to buy out myportion of the business.
Right, because without that hemight not have the capital.
And now my wife receives mybusiness and she doesn't know
how to run a financial planningpractice right, so you're kind
of stuck.
But my business partner havingenough life insurance, the
benefit, he can buy out my wifeand it's a win-win.

(06:45):
Right.
He grows his business, he cantake care of my clients, my
clients still have a competentadvisor to serve them and my
wife doesn't have to worry aboutselling a financial planning
practice and going through thatmaneuver.
So there's other types ofsituations, but those are the
four most common that we see.

Speaker 2 (07:04):
Wow, Thank you so much for explaining that to us.
Now another question for you Isthere a difference in approach
for single individuals versusfamilies with children?

Speaker 3 (07:18):
Not quite a different approach, but I would just say
I would caution you if you aresingle, without kids.
I actually had a client.
That happened to him a fewyears ago, early 30s, not
married, no kids, no onedepended on his income.
But earlier in his career alife insurance guy got a hold of

(07:38):
him and sold him a whole lifepolicy.
And when we met up, it's one ofthose hey man.
And we just practically walkedthrough the steps of you don't,
if you passed away, no one'srelying on your income, not to
say that your life doesn't havevalue, but there's no income
replacement needed.
So for single folks there maybe realistically walking through
, okay, who is really dependingon my income?

(08:00):
And if the answer is nobody,hey, let's save those premiums.
Let's not just pay thosepremiums for life insurance,
let's use that cashflow forother areas of our financial
planning.
So, definitely, if you havechildren at home definitely from
all the clients that I meet,especially in the 30s and 40s
you just have to have lifeinsurance.

(08:21):
The next big question is howmuch?
Right.
So we go through this analysisto determine how much you need
and how long you need it.
So, once again, life insuranceis income replacement, is income
replacement.
So if you are two years fromretirement and not earning,
you'll be retired and notearning an income anymore.
You may need a lot less lifeinsurance than you think.

(08:41):
Compared to my example earlier,you're in your 30s, have a
couple of kids.
You may need a lot more lifeinsurance than you think.
So a good rule of thumb is tentimes your income, right, you
make 150 grand a year.
A good rule of thumb is 1.5million of life insurance, right
?
If you never talked to afinancial professional and sat

(09:02):
down and really went through howmuch you need, that's a great
starting point, right?
But of course, like anything inlife, it depends.
Everyone's situation's a littlebit different.
How much debt do you have?
What's your income?
What are your goals in the thefuture?

Speaker 2 (09:17):
and that helps determine how much life
insurance you need now, arethere any common misconceptions
people have about life insurancemeans besides the one that you
just explained?

Speaker 3 (09:29):
yes, I would say what are referred to earlier.
A lot of folks think they needlife insurance for the rest of
life.
That's what's called permanentlife insurance.
So, whole life, universal life.
Those are traditionally therefor you and you'll life
insurance for the rest of yourlife.
That's what's called permanentlife insurance.
So, whole life universal life.
Those are traditionally therefor you and you'll pay those
premiums until the day you meetthe Lord, right?
That's not what we recommend.
99% of my clients do not needpermanent life insurance, okay.

(09:53):
So we recommend buying termlife insurance and, just like it
refers to you, buy it for aterm.
So if you buy a million dollars, 10 year term, you will have
that life insurance enforced forthose next 10 years, right?
Compared to you buying a 20year term, you'll have it for
the next 20 years, right?
So once again, we want lifeinsurance to bridge that gap

(10:16):
until you are self-insured.
So at the end of the day, it'sa little bit different.
Customizing it is a big deal,but once again, we meet with
clients to go over how much debtdo you still have?
We would want you to pay thatoff.
God forbid you passed away.
What is your income,realistically?
Would your spouse want to stayin the same house.
We see that a lot.

(10:37):
Some defiantly do.
Some say, no, I wouldn't wantto stay there, god forbid.
My spouse passed away.
So what would selling that looklike?
How much equity?
And that's all rolled into theequation of how much you need
and how long you need it.

Speaker 2 (10:53):
Wow, cody, that was some fantastic information you
gave us today, a great, greatbreakdown of everything when it
comes to life insurance.
Thank you for helping usunderstand how to protect our
loved ones with clarity andconfidence, and we'll see you
next time on the SteadfastWealth Planning Podcast.

Speaker 3 (11:12):
Absolutely.
Thanks, Sophia.

Speaker 1 (11:18):
Thanks for joining us on the Steadfast Wealth
Planning Podcast.
Ready to take the next step inyour financial journey, visit
steadfastwealthplanningcom for acomplimentary consultation or
call 469-606-2040.
Smart planning, christianvalues, a life well lived.
We'll see you next time.