Will Tulp

Should You Consider an Umbrella Insurance or Excess Liability Policy for Your Business?

In today’s business climate, even well-insured companies can find themselves exposed to unexpected and costly legal claims. When a severe incident exceeds the limits of your existing insurance policies, you may be responsible for paying the difference — unless you have an additional layer of protection in place.

This is where commercial umbrella and excess liability insurance come in. While often used interchangeably, they serve distinct purposes. Think of umbrella and excess liability insurance as your business’s safety net. They aren’t required by law, but they can be the difference between a manageable setback and a financial catastrophe.

Understanding their differences and which makes sense for your business is key to ensuring your coverage is truly comprehensive. Here’s a breakdown of the core differences between these two important coverages and how to decide which option fits your business needs.

Why Do You Need Additional Liability Coverage?

Your business may already carry policies like:

• General liability insurance
• Commercial auto insurance
• Commercial property insurance
• Workers’ compensation coverage
• Group health & life coverage

But if a catastrophic event such as a major injury claim, lawsuit, or property damage incident exceeds your policy’s coverage limits, the rest comes out of pocket. 

To avoid the financially devastating outcomes of these potential claims, umbrella and excess liability insurance can be purchased to apply additional coverage above a given policy or policies’ limits. But which one should you secure, and how are they used when needed?

What’s the Difference Between Umbrella and Excess Liability Insurance?

At a glance, both umbrella and excess liability insurance offer additional protection beyond your base policies. But there are a few key distinctions:

• Excess liability policies provide extra coverage for one specific underlying policy (such as general liability) and only apply to the risks already listed in that policy.
• Umbrella policies extend limits across multiple underlying policies and can even offer broader protections that aren’t covered by the base policies.

Think of excess liability as a “limit increase” for a single policy, while umbrella insurance acts as a wider net that supports several lines of coverage. Additionally, umbrella policies are not available for every type of business. Oftentimes if an umbrella policy is not available, excess liability policies are. 

What Is Excess Liability Insurance?

Excess liability is a policy that extends the coverage limits of a single underlying policy.

How it works:

• If your general liability policy has a $1 million limit, and a claim totals $1.5 million, your excess policy kicks in to cover the additional $500,000 — assuming you have an additional $1 million limit on your excess liability policy.

Key feature:

• Excess policies are often written on a follow-form basis, meaning they only provide additional coverage to what is already defined in the underlying policy. They don’t add new types of coverage.

Best for:

• Businesses looking to increase the protection on specific, high-risk lines of coverage. As an example, you may want to increase your “Per Occurrence” policy limit beyond the typical $1 million. But if your carrier does not offer higher limits, you can purchase the additional coverage using an excess liability policy. 

What Is Commercial Umbrella Insurance?

Umbrella insurance also increases your liability limits — but across multiple policy types.

How it works:

• Let’s say you exceed your general liability limit, and a week later, you’re involved in a commercial auto accident that also exceeds your policy’s limit. A commercial umbrella policy can help cover both. 

Key feature:

• Umbrella policies often provide broader protection than excess policies, sometimes covering claims that fall outside the scope of the underlying policy.

Best for:

• Businesses that want a cost-effective way to add an extra layer of liability protection across several types of coverage.

Comparing Commercial Umbrella Insurance and Excess Liability Insurance: Key Differences Chart

📌 Note: Not all businesses can be approved for umbrella policies. In some cases, especially for businesses considered high risk (such as those in construction or security), carriers may decline to offer an umbrella policy altogether. In these situations, an excess liability policy may be the only available solution for increasing coverage limits.

Which Coverage Do You Need: Umbrella, Excess Liability, or Both?

Every business is different, but here are some key indicators that you may benefit from additional liability coverage:

✅ You regularly work with the public or on third-party property
✅ You operate company vehicles or have a commercial auto fleet
✅ You’ve signed contracts that require higher liability limits
✅ You have employees or subcontractors interacting with customers
✅ Your business assets or net worth make you a target for large claims

Secure Additional Liability Insurance with an Agency That Understands Your Unique Needs

At ArcLight Insurance Agency, our trusted team will help you evaluate your exposure and walk through your coverage limits. We work to understand every aspect of your business, from insurance risk factors to business scope and vision, then build a plan that ensures you’re not caught off guard when the unexpected happens.

Let’s make sure your insurance doesn’t stop where the risk begins.

Secure a FREE quote below and schedule a consultation today to explore the best liability extension options for your business.

Let’s get you covered.

Select your desired coverage and get your FREE quote now.

The Right Way to Evaluate and Compare Insurance Quotes

The biggest mistake people make when securing coverage is shopping for insurance like they shop for clothes — simply try on a few shirts, slip on a few different pairs of shoes, compare prices, and buy the best quality for the lowest price. Unfortunately, your new insurance policy requires a bit more attention, and a lot more knowledge.

Getting multiple quotes is smart — but when it comes to insurance, what you’re buying matters more than what you’re paying.

Whether you’re a service provider, tradesperson, or operate a hybrid team of remote and in-person staff, here’s what every small business with up to 10 employees should know about protecting themselves from costly insurance blind spots.

The Fine Print Is Where It All Happens

Let’s say you need homeowners insurance and collect three quotes. Quote A is the cheapest, so it must be the best deal, right?

Not so fast.

Insurance pricing is directly tied to coverage, and coverage varies more than most people realize. Many insurance quotes appear similar on the surface but are built on entirely different assumptions under the hood. Three different agents could submit three different quotes using completely different limits, deductibles, or rating factors — all of which affect what you’re actually covered for, and how much you’ll get if you ever need to file a claim.

At ArcLight Insurance, we’ve reviewed policies where clients thought they were covered, until they weren’t. For example:

Actual Cash Value (ACV) vs. Replacement Cost (RC)

• Many homeowners are shocked to find that their roofs were insured at Actual Cost Value, meaning the value of their roof is reduced based on depreciation. Your 15-year-old, $25,000 roof? Might be worth $2,000 on paper. After your deductible, you may get nothing from your claim. In contrast, a Replacement Cost policy would cover the full cost to rebuild the roof with like kind and quality — no depreciation deduction.

Missing Endorsements

• One common omission we’ve seen is the lack of Personal Injury coverage on landlord policies. This coverage protects against lawsuits for wrongful eviction or invasion of privacy, which is highly relevant in today’s rental landscape.

4 Main Clauses You Should Look For in Your Insurance Policy

Here are a few examples of things you need to review when comparing insurance quotes:

• Coverage limits: Are they adequate for the value of your home and belongings? Your home’s replacement cost valuation should be sufficient to cover the cost of a total loss to your home. That includes debris removal, architectural plan costs, the contractor’s fees and costs, and finally, all of the materials needed to rebuild your home. Don’t forget the additional costs to rebuild your home with today’s building code requirements, such as fire suppression systems and upgraded electrical requirements.
• Deductibles: Higher deductibles can lower premiums, but will you be able to afford them if something happens?                            
• Endorsements & exclusions: Are there special riders for valuables like jewelry, art, or collectibles? Are common perils excluded? Your belongings are covered worldwide. So if you are snorkeling in Thailand and you lose your wedding ring, it will be covered as long as it is “scheduled” on your policy.
• Settlement terms: Is your roof, for example, covered at ACV or RC? Are belongings covered at replacement cost?

Changes That Should Trigger a Policy Review

Making well-informed decisions on your preferred policy is not just about comparing quotes. It’s also about keeping your policy up to date. Here are some common life changes that should prompt a conversation with your agent:

• Home renovations or additions.
• Buying expensive electronics, jewelry, or collectibles. Homeowners policies have what we call “underlying” limits for jewelry, firearms, or collectibles. For example, the total underlying limit for jewelry coverage might be $1,500 or $2,500 with no one piece of jewelry being covered more than $1,000. That means if your wedding ring costs $50,000, unless that ring is scheduled on your policy, the most the carrier will pay in the event that ring is lost or stolen is $1,000.
• Upgrading appliances or furniture.
• Taking on new tenants or renting out a property.

Many people forget to update their policy, only to discover too late that their new purchases weren’t covered.

Skip the Guesswork, Use a Trusted Insurance Agent

The biggest mistake people make is assuming all quotes are based on the same inputs. Understand: insurance quotes are not interchangeable. They reflect different coverage decisions, underwriting assumptions, and risk calculations. The only way to make a smart decision is to understand what’s in the policy. That’s where we come in.

At ArcLight Insurance, we believe an informed client is a protected client. That’s why we never just “run the numbers” and leave you to guess. We review every quote with our clients to help them understand not just what they’re paying, but what they’re getting. 

We believe knowledge is power, and the more informed you are, the better decisions you’ll make about protecting what matters most.

Start your FREE quote with ArcLight Insurance today and get covered with confidence, because the best price means nothing if your policy doesn’t pay when you need it to.

Let’s get you covered.

Select your desired coverage and get your FREE quote now.

Better Businesses Have Better Coverage

So you’ve launched your business, built a steady flow of clients, and may even have a few employees on payroll. But as your business grows, so do your risks — and not every policy offers the protection you might think it does. Small business owners often believe they’re too early in their journey to need full coverage, but unfortunately, that’s when many discover coverage gaps the hard way.

Before you scale any further, it’s time to ask a question too many small business owners avoid:

Are you actually protected if something goes wrong?

From lawsuits to stolen laptops, business interruptions to unexpected employee claims, the right insurance coverage isn’t just about checking a box. It’s about safeguarding your hard work and ensuring you don’t lose everything you’ve built overnight.

Whether you’re a service provider, tradesperson, or operate a hybrid team of remote and in-person staff, here’s what every small business with up to 10 employees should know about protecting themselves from costly insurance blind spots.

The Most Common Gaps in Small Business Insurance

A safe and secure foundation is crucial for success when scaling your business. Without the right insurance policies in place, you could be on the hook for:

• Client lawsuits over contract disputes or perceived mistakes
• Injuries that happen in your workspace (even a co-working space)
• Damaged or stolen equipment you rely on to operate
• Cyberattacks that compromise client data
• Employee claims over workplace conditions or discrimination

A single claim could cost tens of thousands of dollars, and most small businesses aren’t ready for that hit. Here are the most common reasons small businesses end up underinsured or unprotected:

1. Assuming General Liability Covers Everything

Many small businesses think a general liability policy is enough. While it’s essential, it only covers specific types of claims such as third-party bodily injury related to a slip and fall or from a product or service you provide, damage to a rented property, and personal/advertising injury. It doesn’t protect you from service-related mistakes or employment disputes.

2. Hiring Without Workers’ Compensation

Workers’ compensation insurance is legally required in most states the moment you hire an employee. Even a part-time assistant or independent contractor may trigger legal requirements depending on your location. Without it, you could face penalties and legal exposure — not to mention having no coverage if your employee actually does get injured on the job. 

3. Overlooking Professional Liability Coverage (AKA: Errors & Omissions Insurance)

If your business offers professional services such as advice, designs, consulting, or anything that can be perceived as a service, any errors or mistakes made in the scope of your work can expose you to negligence claims. These can be costly even if they’re unfounded. Professional liability (or errors & omissions) insurance helps protect your business in these situations.

4. Skipping Cyber Liability Coverage for Digital Operations

Cyber insurance isn’t just for large companies. Any small business that stores client data is at risk of a cyber attack or data hack. Client data can often include client contact information, date of birth, social security numbers, and information on client digital payments like credit card information. Without cyber liability coverage, you may be responsible for data breach notifications, credit monitoring, or regulatory fines as well as any downtime your business experiences as a result of a data breach. 

5. Outgrowing Your Initial Policy Limits

Many small business owners start with a minimal policy and never revisit it. But as you add staff, sign new contracts, or expand operations, your liability and coverage needs grow. Your policy limits need to evolve with your business.

The Ten Essential Policies Every Small Business Should Consider

If you’re operating a small business with up to 10 employees, consider this your foundational insurance checklist:

1. General Liability Insurance

Covers third-party claims of bodily injury, property damage, and advertising injury. Often required by landlords, vendors, or clients before contracts can be signed.

Who needs it: Everyone, regardless of industry or size.

Examples:

• A delivery person trips over a cord in your office and sues you.
• You accidentally damage a client’s property during a site visit.
• Someone sues you for a social media post they claim is defamatory.
• Customers get food poisoning and are hospitalized as a result of dining in your restaurant.
• Customers who purchase a product that you sell and/or manufacture are injured from the use of that product.
• You’re a contractor or tradesperson, and there is a malfunction from something you’ve built or repaired.

Price range: $600–$3,000/year, depending on your risk level.

2. Professional Liability Insurance (Errors & Omissions)

Protects your business against claims of negligence, mistakes, or failure to deliver services as promised. Especially important for consultants, creative professionals, and service providers.

Who needs it: Service providers, consultants, creatives, and freelancers.

Examples:

• A client says your strategy led to revenue loss.
• You miss a deadline that causes delays and penalties.
• An error in your work results in a lawsuit.

Price range: $900–$5,000/year, depending on your profession.

3. Workers’ Compensation Insurance

Covers employee injuries and illnesses that occur in the workplace. Legally required in most states. Helps cover medical expenses, lost wages, and rehabilitation.

Who needs it: Any business with one or more employee(s).

Examples:

• Your assistant trips and injures their knee at the office.
• A part-time delivery driver is injured while working.

Price range: Varies based on payroll and industry, but for most low-risk businesses ranges between $1,000 to $3,000 .

4. Commercial Property Insurance (Building Owner Coverage)

Just like you would purchase a homeowners policy if you own a home, you need to purchase commercial property coverage to protect your commercial property. 

5. Commercial Property Insurance (Business Personal Property)

Protects physical assets your business owns — including equipment, computers, or inventory — from events such as fire, theft, or vandalism.

6. Business Owner’s Policy (BOP)

A cost-effective package that typically bundles general liability and commercial property insurance. Ideal for small businesses looking to build a strong foundation of coverage.

Who needs it: Small businesses that want bundled protection. If you rent office space, have inventory or equipment, or want bundled coverage, a BOP can be the most affordable and efficient way to go. BOP policies are not available for all business types. For example, if a BOP policy is not offered for your class of business, ArcLight Insurance recommends purchasing the General Liability and Commercial Property policies separately as standalone policies. 

Price range: Varies based on package customizations.

7. Cyber Liability Insurance

Protects against the financial impact of data breaches, cyberattacks, and client data exposure. Increasingly essential for any business that operates online or stores customer information.

If a company has a server (local or remote) or a website with an online database of customer information, they may consider getting this coverage. This protects companies in the event that their client database is breached and their customer data is lost or stolen. 

Who needs it: Any business that handles sensitive data, takes online payments, or stores customer data on company computers/laptops and/or company owned servers.

Examples:

• Your customer records are compromised after a phishing scam.
• You get locked out of your systems by ransomware.
• A contractor you hired exposes data via a third-party tool.

The two most important limits of coverage under a cyber plan are the Breach Notification and System Damage/Business Interruptions coverages. If a breach happens, the insurance company will pay for items like Privacy Liability, Media Liability, Regulatory Proceedings, Threats & Extortion, PCI Fines and Penalties along with Breach Notification and System Damage/Business Interruptions. 

Arguably the two most damaging items to businesses are the Breach Notification, which reflects the cost a business incurs to notify all past and present clients and vendors about the breach, and Business Interruption. If your business’ website is down as a result of a cyberattack, that may also create financial hardship for your business if not protected.

Cost range: $1,000–$5,000/year depending on your business size and data risk.

8. Employment Practices Liability Insurance (EPLI)

Covers claims related to discrimination, wrongful termination, or harassment in the workplace. Valuable coverage if you manage a team or are planning to hire.

9. Commercial Auto Insurance 

Your business may own company vehicles used for company purposes. If you purchase a car and the company’s name is on the vehicle registration, you will need a commercial auto policy since company-owned vehicles cannot be insured using personal auto insurance. 

Company vehicles are not just big trucks and vans — personal vehicles such as sedans and SUVs can be company vehicles as long as the company is named on the registration of the car. In those instances, a commercial auto policy would be needed, and these policies can cost the same or slightly less — yes, you read that right — than a traditional auto policy. 

10. Inland Marine Insurance

If your business tools travel with you and are often stored in your vehicle overnight, this is an optional coverage worth considering. This coverage can save you thousands of dollars in the case of theft or damage while driving or being stored in your vehicle. 

Businesses and freelancers that greatly benefit from having an Inland Marine Insurance policy include:

• Photographers who bring their equipment on shoots
• Production teams, especially those who travel with equipment to set up on-site
• Musicians who travel with their instruments
• Contractors who store their tools and equipment in their vehicle
• Vendors who bring their products to events or markets
• Any business that relies on equipment or materials that travel to various locations

Make Sure You’re Properly Protected in 5 Simple Steps

✅ Review Your Risks and Operations
Start by identifying where your business may be vulnerable. Are you storing client data? Hiring employees? Transporting tools or equipment? These factors can influence which coverages you need.

✅ Understand What Your Policies Exclude
Exclusions can leave dangerous gaps. Work with a licensed insurance advisor to walk through what’s not covered in your current policy.

✅ Work With a Trusted Advisor
A knowledgeable insurance partner can help tailor your coverage and explain what’s relevant for your industry, size, and growth stage.

✅ Consider Policy Limits Carefully
Low-cost policies may also come with low limits. Make sure your coverage amounts reflect your actual business value and liability exposure.

✅ Reassess Annually
Just like a home or auto policy, your business insurance should be reviewed every year — or sooner if you’ve experienced growth, added services, or brought on staff.

Use ArcLight Insurance and Secure the Right Coverage for Your Business 

Insurance isn’t one-size-fits-all. A business with ten employees needs a different plan than a solo entrepreneur — and both need more than a generic policy pulled off the shelf.

At ArcLight Insurance, we help small business owners build policies that are aligned with their real-world risks. Our advisors take the time to learn how you operate and guide you toward the right solutions — not just the default ones.

Let’s protect what you’re building, so you can shine with confidence.

Schedule a free coverage review today to get started.

Understanding the Difference Can Save You Money — and Legal Trouble

If you use your vehicle for work, you might assume your personal auto insurance has you covered. But that’s not always the case. Understanding the differences between commercial and personal auto insurance is crucial for ensuring you have the right protection. Let’s break down what each policy covers, who needs what, and how to make the right choice for your situation.

Personal Auto Insurance vs. Commercial Auto Insurance

At first glance, personal and commercial auto policies may seem similar, but they serve different purposes. Here’s how they compare:

Who Needs Commercial Auto Insurance?

You might need a commercial policy if you:

• ✅ Use your vehicle to transport goods, equipment, or passengers for work
  
• ✅ Operate a business that requires frequent travel between job sites
  
• ✅ Have employees driving company-owned or leased vehicles
  
• ✅ Use a van, work truck, or specialized vehicle for business purposes
  
• ✅ Carry high-value tools, inventory, or commercial equipment in your vehicle

Examples of businesses that need commercial auto insurance:

• Contractors (plumbers, electricians, landscapers)
• Delivery services (florists, food delivery, courier companies)
• Rideshare or transportation services (Uber, Lyft, shuttle services)
• Real estate agents and sales professionals who frequently travel for work or give rides to clients to visit various prospective homes.

When Is Personal Auto Insurance Enough?

A personal policy might be sufficient if you:

1. Use your car primarily for commuting and personal errands
2. Occasionally drive to work-related events (but not as a primary function of your job)
3. Don’t transport clients, products, or equipment for work
4. Don’t have employees driving your vehicle

However, if you use your personal car for business-related activities regularly, your insurer might deny claims if they determine you should have had a commercial policy instead.

What Happens If You Choose the Wrong Policy?

1. Claim Denials: If your personal auto insurance company discovers you were using your car for business purposes, they can deny your claim—even if you pay your premiums on time.
2. Lawsuits & Liability Risks: Commercial accidents often involve higher damages. Without proper coverage, you could be personally responsible for costs exceeding your policy limits.
3. Policy Cancellations: Misrepresenting how you use your vehicle can lead to your insurer dropping your coverage altogether.

How to Choose the Right Coverage

If you’re unsure whether you need commercial auto insurance, consider your vehicle’s use case. Ask yourself, “What do I use my vehicle for daily?” Do you often carry equipment or inventory for work, or only for personal projects? Are you using your car for more than simply commuting to and from your job site? Additionally, do other employees use your car for work-related activities?

If your car is primarily used for business or if others drive it for work purposes, commercial auto insurance is likely the best choice.

Get the Right Coverage Before You Need It

Choosing between personal and commercial auto insurance isn’t just about cost—it’s about making sure you have the right protection when it matters most. If you’re unsure whether your current policy covers your work-related driving, ArcLight Insurance can help.

Contact us today for a free consultation, and we’ll make sure you have the right coverage for your needs.

Protecting Your Investment: What Every Landlord Needs to Know About Insurance

Owning rental property can be a smart financial move—but only if you have the right insurance coverage. Standard homeowners insurance won’t protect you when you’re renting out a property, so securing a proper landlord insurance policy is essential. But not all policies are created equal. Here’s what you need to consider to ensure you’re fully protected.

1. Property Coverage: Protecting the Structure Itself

Your rental property is a valuable asset, and a landlord insurance policy should cover damage to the structure from risks like:

• Fire, smoke, and explosions
  
• Windstorms, hail, and lightning
  
• Vandalism and theft
  
• Water damage (excluding floods)

📌 Tip: Make sure your policy covers the replacement cost, not just the actual cash value. The cost to rebuild may be significantly higher than the market value of your property.

2. Liability Insurance: Covering Lawsuits & Tenant Injuries

If a tenant or visitor gets injured on your property, you could be held liable for medical bills, legal fees, and damages. Liability coverage protects you from lawsuits related to:

• Slip-and-fall accidents
  
• Faulty property maintenance (e.g., broken stairs, unsafe wiring, uneven flooring)
• Dog bites or other injuries caused by pets on the property (IF your dogs are covered as part of your homeowners policy. You should disclose your dog’s breed and age to your agent at the time of policy purchase to ensure your carrier will cover liability related to your dog(s).)

📌 Tip: Consider at least $1 million dollars in liability coverage to safeguard your assets, especially if you own multiple rental properties. Otherwise, consider obtaining a $1 million dollar umbrella policy that will increase the liability limit of your home. 

3. Loss of Rental Income: When Your Property Becomes Uninhabitable

If a fire, storm, or other covered event makes your rental unlivable, you won’t be collecting rent—but your mortgage, taxes, and maintenance costs won’t stop. Loss of rental income coverage helps replace your lost rent while repairs are being made.

📌 Tip: Check your policy’s coverage duration—some policies will only reimburse lost rent for a limited time.

4. Tenant-Related Risks: What’s Covered and What’s Not

Landlord insurance protects your property, but it doesn’t cover your tenants’ personal belongings. Encouraging (or requiring) tenants to carry renter’s insurance ensures their possessions are protected and reduces potential disputes.

Additionally, some landlord policies offer optional coverage for tenant-related risks, such as:

• Tenant default insurance – Covers lost rent if a tenant stops paying
  
• Vandalism by tenants – Protects against intentional damage
  
• Legal fees – Helps with eviction-related costs

📌 Tip: Screening tenants properly and requiring renter’s insurance can reduce your risk of costly claims.

5. Additional Coverages Landlords Should Consider

• Flood Insurance – Standard policies don’t cover flood damage, so if your rental is in a flood-prone area, a separate policy is a must.
• Earthquake Insurance – If your rental is in a seismically active area, consider adding earthquake coverage.
• Umbrella Liability Policy – If you own multiple rental properties or have high-value assets, an umbrella policy provides extra liability protection beyond your standard landlord policy.

📌 Tip: Work with an insurance expert to identify the specific risks for your rental location.

The Right Coverage Saves You Money & Stress

As a landlord, having the right insurance policy is just as important as having reliable tenants. Protecting your investment with a comprehensive landlord insurance policy ensures you’re covered for unexpected property damage, liability claims, and income loss.

At ArcLight Insurance, we specialize in helping landlords find tailored coverage that fits their needs. Contact us today for a free policy review and ensure your rental property is fully protected.

Choosing the Right Coverage Amount—Without Guesswork

Life insurance is one of the most important financial decisions you’ll make, but how much coverage is enough? Too little, and your loved ones could struggle financially. Too much, and you may be overpaying for coverage you don’t need. The key is finding the right balance based on your income, debts, and long-term financial goals.

Factors to Consider When Determining Your Life Insurance Limit

There’s no one-size-fits-all answer to how much life insurance you should carry. The right amount depends on your unique financial situation and future obligations. Here’s how to break it down:

1. Income Replacement: How Much Do Your Loved Ones Need?

If your income supports your family, your life insurance should cover multiple years’ worth of earnings to help them maintain their lifestyle. A common rule of thumb is 10 to 15 times your annual income.

For example, if you earn $75,000 per year, you should consider at least $750,000 to $1.1 million in coverage to replace lost income for your dependents.

How many years is right for you? Most clients calculate this one of two ways: either by the total number of years remaining until they would likely retire, or the total number of years of income replacement to carry based on the age of their youngest child.

For example, if you are 35 years old and expect to retire at 65, you would opt to carry 30 years of coverage. Alternatively, if your youngest child is 4, you may opt to have enough coverage until that child turns 18 and can support themselves. So, you could opt to carry 14 or 15 years of coverage.

At ArcLight Insurance, we consider Term Life Insurance to be a vehicle for income replacement during your working years. These policies come in various “terms” of time. Usually 10, 20 or 30 years of coverage. So, in the second example above, where they calculated 14 to 15 years of coverage until their youngest child reached adulthood, we may recommend a 20 year term policy.

📌 Tip: If you’re the sole provider or have young children, err on the higher end to account for long-term financial needs.

2. Debts & Final Expenses: What Will Need to Be Paid Off?

Your policy should also cover any outstanding debts so that your family isn’t left with financial burdens. Consider:

• Mortgage balance
  
• Car loans
  
• Credit card debt
  
• Student loans
  
• Medical bills
  
• Funeral and burial costs (typically $10,000–$15,000)

📌 Tip: If your goal is to keep your family in their current home, ensure your policy covers the full remaining mortgage balance.

3. Future Expenses: Protecting Your Family’s Long-Term Needs

Think beyond immediate financial obligations—life insurance can help fund major future expenses, such as:

• College tuition for children – Average costs range from $25,000 to $50,000 per year at public universities.
• Spousal retirement savings – If your partner depends on your income for retirement planning, factor in additional coverage.

📌 Tip: Add at least $100,000 to $200,000 per child if you want to fund their college education.

The DIME Formula: A Quick Calculation Method

The DIME formula helps break down life insurance needs based on four key factors:

Estimated coverage need: $1.5 million

This method ensures you’re covering all major financial responsibilities your loved ones will face in your absence.

What Type of Life Insurance Should You Get?

• Term Life Insurance – Best for affordability and temporary coverage (10, 20, or 30 years). Ideal for covering mortgages, income replacement, and child-raising years.
• Permanent Life Insurance – Includes whole life or universal life, which lasts your lifetime and builds cash value. Best for estate planning, lifelong protection, and supplementing retirement income.

📌 Tip: Many families combine policies—e.g., a 20-year term policy for income replacement and a small whole life policy for lifelong protection.

Get the Right Coverage Without Overpaying

Choosing the right life insurance limit doesn’t have to be overwhelming. By factoring in income, debts, future expenses, and financial goals, you can confidently select a policy that protects your loved ones without unnecessary costs.

At ArcLight Insurance, we help individuals and families customize life insurance policies to fit their needs. Contact us today for a free consultation and let’s ensure you have the right protection in place.