In this issue of the Insurance Reporter, we focus on Life Insurance

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In this issue of the Insurance Reporter, we focus on Life Insurance

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:

1.   Replace income for dependents

If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.

2.  Pay final expenses

Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.

More Reasons

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?

How should I choose what type of life insurance to buy?

What is a beneficiary?