The basic premise of life insurance is that when you die, the death benefit to your survivors should be large enough so they enjoy the same living st andard as they did while you were alive. This issue of the “Insurance Reporter” is focused upon how much life insurance you need to reach that objective.
Read on to underst and why you should buy life insurance. How to choose the right amount of coverage. It’s easier when you think like an economist – and use our convenient online Life Insurance Needs Calculator to see just how much life insurance you need. Underst and the principal types of life insurance and which one may be right for your needs, and much more.
The future of your loved ones is in your h ands. Please contact us for a private discussion to review your next best steps.
Why Should I Buy Life Insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
2. Pay final expenses
How Much Life Insurance Do I Need?
In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.
If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals.
If you have dependents, buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur to replace services you provide (for a simple example, if you do your own taxes, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
Scared To Death Of Life Insurance
Choosing the amount of coverage is hard. The trick is to think like an economist.
Life insurance may be the most badly purchased financial product. Some people, unwilling to face the thought of death, never buy coverage at all. Others feel guilty about the prospect of leaving loved ones behind and buy too much. Even those who put their emotions aside tend to fall back on oft-repeated and oft-wrong rules of thumb, such as buying a policy worth five times your annual salary.
Choosing the right amount of life insurance is no easy matter. Even most insurance agents and financial planners rely on rules of thumb or unsophisticated worksheets — or put the onus on clients to decide how much insurance to carry. Fortunately, underst anding a few economic principles will go a long way toward helping you make a smart decision.
Life Insurance Needs Calculator
So, how much life insurance do you need? Well, the answer isn’t really how much life insurance you need… it’s how much investment capital your family will need at the time of your death. Their need for capital — on a gross basis — is really a function of two variables:
1. How much will be needed at death to meet immediate obligations?
2. How much future income is needed to sustain the household?
The first category is fairly easy to estimate. It’s the sum of final expenses (including uncovered medical costs, funeral expenses and final estate-settlement costs) and other lump-sum obligations (such as outst anding debts, mortgage balance, and college costs).
Quick Links
What are the principal types of life insurance?
A serious illness or injury can harm more than your health-it can have an impact on your ability to work and meet your family’s living expenses.
Examine how the policy defines a disability. Some policies pay benefits if you are unable to complete the duties of any occupation for which you are reasonably qualified by training, experience, and education. Others pay benefits if you are unable to perform the major duties of your own occupation. Some policies also pay benefits if you become ill or injured and are unable to earn a specified percentage of your income.
It took just 17 days for Cindy Wrenn to realize that her disability insurance premium was not just another drain on her checking account. One-third of American workers are likely to be disabled for an extended period, and she became one of them when she had a stroke and brain aneurysm at age 28.
Welcome to the Long-Term Care Planning tool. The primary goal of this tool is to help you underst and:
The President’s Bill puts American families and small business owners in control of their own health care.
With the unemployment rate topping 8.5 percent, and with more layoffs and job cuts still expected, many households are forced to create a strict budget, even as their debts continue to rise. People are definitely more worried than ever about their financial well-being, and, if they are also worried about the financial well-being of their family, they should invest in whole life insurance; a life insurance policy that pays their loved ones after their untimely death, with some added benefits.
Properly insuring a rental car can be confusing, frustrating and downright daunting. Unfortunately, many consumers do not even think about car rental insurance until they get to the counter, which can result in costly mistakes-either wasting money by purchasing unnecessary coverage or having dangerous gaps in coverage.
Ever feel pressured to pay for insurance when you rent a car? Experts say you may already be covered by your existing insurance policy or major credit card. You might already be covered, experts say, so do your homework
Frequent business traveler James Smith says he’s saved “tons of money” during the past 30 years declining car rental companies’ optional insurance coverage. But, he acknowledges, it could have come in h andy at times.