I see a question How much life insurance do I need? , but I want to buy least amount of Life Insurance but still cover my kid and spouse up to an extend.

We all get annual social security statements and it mentions https://www.ssa.gov/benefits/survivors/ ,so it looks like in case of one's death the survival benefits will kick in till the kid reach 16 years of age.

So should not one just buy $300K (same amount as mentioned in insurance company fails and goes into liquidation states "When an insurance company fails and goes into liquidation, the state's insurance guarantee fund will kick in to protect the state's policyholders") or less as the insurance needs are decreasing each year the kid is growing and one's own savings get accumulated. enter image description here

  • Your desire to save money is commendable as is your desire to provide for your child until the child turns 16. However, the SS survivor's benefits are small enough that it is a false economy to buy only enough life insurance that together with the SS benefits will add up to the recommended $300K. Mar 19, 2019 at 19:07

3 Answers 3


Let's assume, for the sake of argument, that you have a primary insurance amount of $2,228 (this happens to be what is called the third bend point). In that case, your widow(er) and children would each be eligible to receive up to 75% of your PIA as a monthly payment. However, the total family payment would be limited to about 175% of your PIA, and each survivor's share of that would be prorated. So to continue with the example, if you have one spouse and two children, each would receive 58% of your PIA each month, or about $1300 each.

Your widow(er) would get the payment until the earliest of the following: The youngest kid turns 16, the widow(er) remarries, or they earn more than $48,840 (specific to my hypothetical example). Survivors benefits are subject to the earnings test. In 2019 (future years will be adjusted for inflation) (s)he can earn up to 17,640 with no reduction in benefits. Every two dollars earned above that reduces his or her benefit by one dollar. So in the example, 17640 + 2 * 1300 * 12 = 48840. I believe it's applied annually. But unlike remarriage and kids turning 16, it's not a permanent trigger, meaning if your spouse works one year but not the next, the benefit would be paid in full in the year (s)he didn't work.

Your kids would get the payment until the earliest of: they turn 18, they get married, or they personally earn more than $48,840. The kids benefits are also subject to their own personal earnings test, but it's obviously not common for a minor to earn that much money. As far as I know, the kids' benefits aren't reduced by the widow(er)'s benefits being reduced or eliminated.

$3900 per month is nothing to sneeze at, but considering the level of income you would have had to have such a high PIA, it's probably not enough to keep your family in the manner to which they've become accustomed. So then your widow(er) probably has to work, and then (s)he will not get any benefits due to the earnings test. I've read conflicting info about whether his or her prorated share that (s)he's not even receiving still counts against the family maximum. For example, this article says it doesn't count against the max . The kids' benefits end when they turn 18, just in time for them to head off for college.

There is some kind of adjustment made if you die before you've gotten 35 years of earnings. I honestly don't know how it works, so I can't explain it. But you can log into the SSA website and it will tell you your current PIA but also your specific amounts for survivors benefits.

Your hypothetical family could get around $3300 every month on behalf of the kids, which would definitely be helpful!

  • Thanks, can you please elaborate on earnings test ? Does it apply to surviving spouse earnings or kids them selves. Assuming Spouse is working and earning more than $48832, will the kids portion of the $1300 per example will be still paid by Social Security till age 16 or age 18 ?
    – Neil
    Mar 20, 2019 at 13:56
  • @Neil the kids' portion would still be paid. I expanded on the earnings test.
    – stannius
    Mar 20, 2019 at 16:04
  • @Neil if you've found my answer helpful, please upvote and/or accept it. See meta.stackoverflow.com/help/someone-answers
    – stannius
    Mar 22, 2019 at 16:36
  • I just did. I have other questions that I need help, can you please look and help
    – Neil
    Mar 23, 2019 at 17:37
  • @Neil I looked at your other questions, but didn't have anything useful to add. I tried to improve the titles a bit. The same applies to those: if you found the answers useful, definitely upvote, and if they more or less answered your question, accept.
    – stannius
    Mar 25, 2019 at 15:58

You can use Excel to calculate this.

If the current salary of the person who is to be insured is 100,000 and you want the beneficiary to get same income for 15 years and expects the stocks ( or estimated return on what ever the beneficiary invests in) returns at 7% then you need $910,791.40 in insurance minus the Survivors' benefit. Below is a screenshot and you can change figures as necessary. Negative number in Line 6, is just as how Excel shows result.

You may choose to only replace 93% of salary as 7+% is payroll taxes and payroll taxes are not levied on investment income.

Cropped screenshot of example using Excel


I think the asker is concerned about insurance company going belly up( bankrupt) , so he/she may be looking to protect from that along with protecting the family at a minimum cost.

From the link that is in question, look at statement

the guarantee system in most states is that it lacks a prefunded reserve

And find "Life, Accident, & Sickness Insurance Guaranty Association" for your state and see the limits ( I guess they are moderate at $300K)

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