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Minimum Acceptable Coverage - How to Smartly Balance Your Protection and Budget Goals When Budget is Tight
Founder & CEO

What is the minimum amount of money your loved ones would need to avert disaster and cover their essentials needs (however you & your loved ones define that) if you were suddenly gone?

That’s your “Minimum Acceptable Coverage” aka “MAC”. Everyone’s number is different, and here at AboveBoard we can help you find yours.

Your “MAC” is Usually Not Your Recommended Coverage Amount

Your MAC is usually lower than the amount of life insurance coverage you want. Your MAC is focused on covering the essentials (as you define them). With your MAC, you accept certain trade-offs, in order to hit budget goals.

For example: someone in their 30s might like to have $2 million 30 year term, to support their little ones well through their twenties and cover their own entire expected working life, thus securing retirement for their spouse in any scenario. That same person's MAC might be $1.5 million of 20 year term - cover the kids until they're "out of the nest" and maybe expect that, in a worst-case scenario, their spouse might have to delay their own retirement. (It's ok to make trade-offs, we do this all the time in life!)

When You Need to Know Your MAC

You need to know your MAC when the coverage that you’d like to have is definitely out of the budget you have set.

Oftentimes you know if this applies to you before you apply for life insurance coverage. Here at AboveBoard we work with you to personalize your coverage amount calculation to perfectly reflect your situation and goals.

But sometimes you need to figure out your MAC because you get offered pricing different from what you applied for, and the offered pricing is not workable for you. While this is less common, it does come up in two situation:

  1. The insurance company’s review of your medical records turns up information that even you were not aware of, or you forgot to mention prior to applying
  2. For people with some complexity in their health profiles, the insurance company’s review of medical records turns up a detail that changes the picture

In both #1 & #2, here at AboveBoard we’ll check other carriers to see if they’d take a more favorable view of any “new information”. We’ve had a number of situations where another carrier priced very close to the first carrier was unphased, and clients happily accepted their desired coverage from the 2nd carrier.

In other situations, the new information is perceived the same by all the carriers, so we need to define a client’s MAC to balance their budget and protection goals.

Honing in On Your MAC

Finding your MAC involves accepting trade-offs. At large financial institutions, this practice is called “risk management”. At AboveBoard, we help you define your own risk management, given your situation and goals. 

Here are some examples of trade-offs you might choose when defining your MAC:

  • You had wanted an amount of coverage that would allow you to support your kids into their mid-20s even if you were gone soon, but you decide that getting the youngest started at college (age 18) is enough for your MAC
  • You had wanted to give your spouse the option of not having to generate any income if you were suddenly gone, but you decide to choose a coverage amount that would require your spouse to go back to work after taking ~1 year off to grieve and establish a stable “new normal”
  • You had wanted the option to keep your family in your current home, but decide that you (and they) would be ok with downsizing if you were gone prematurely. (Think very carefully and specifically about what type of home they’d downsize to - moving is pretty traumatic, even more so if it disrupts kids’ schooling when they’re already facing loss of a parent)
  • You’d wanted 30 year term to cover (the bulk of) your expected full-time-working life, but you decide on 20 years to get your kids to college. You choose to accept the risk that you and / or your spouse might feel pressure to “keep working” if you received a grave diagnosis, in order to ensure the healthy’s spouse’s solo retirement

Your MAC is the lowest end of your “range of reasonable”of life insurance coverage. Here at AboveBoard, we can help you define yours, and move forward with an insurance strategy that fits both your protection and budget goals.

Wallis is the Founder & CEO of AboveBoard Financial, a company reinventing investment advice and insurance with revolutionary transparency and honesty. Wallis spent over 10 years at Goldman Sachs as an investment banker and hedge fund investor in financial institutions. She founded AboveBoard to cut through the BS and present important choices with clarity and compassion. Wallis lives in New York City with her husband and two young children.

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