Net worth is the difference between an individual's or entity's total assets and total liabilities at a given point in time. Assets include cash, investments, retirement accounts, real estate, business interests, and personal property, while liabilities encompass mortgages, loans, credit card balances, and other debts. A positive net worth indicates that assets exceed obligations, whereas a negative net worth indicates the opposite. In financial planning and insurance, net worth is a key indicator of overall financial health, capacity for risk, and potential estate-tax exposure. It influences decisions about appropriate amounts of life insurance, annuities, long-term care coverage, and advanced planning strategies involving trusts, gifting, and business succession. Net worth can change over time as investments grow, debts are paid down, or new obligations are incurred.

In practice, advisors ask clients for an approximate net worth as part of fact-finding, often through a personal balance sheet that lists assets and liabilities. Underwriting for large face amounts or premium financing structures typically requires more detailed net worth documentation, such as financial statements or CPA letters, to support financial justification for coverage. A higher net worth may warrant larger death benefits for estate liquidity, wealth transfer, or business buy-sell arrangements, while modest net worth may drive a focus on income replacement and debt protection. Net worth also affects tax planning, influencing whether strategies like irrevocable life insurance trusts, grantor trusts, or charitable planning are appropriate. Advisors revisit net worth periodically during reviews to adjust coverage and planning as clients' financial situations evolve.