Life insurance. We all know it’s important, but it is not typically a subject we enjoy talking about. Other than the obvious reason, many people shy away from the subject due to a lack of understanding. One thing people struggle with is exactly how much life insurance they need for their unique situation. Are we trying to make sure all your debt is paid off and the kids can go to college? Or are we trying to replace your lost income as well? Knowing what you are trying to accomplish with life insurance is an important first step. As important as “how much?” is “what is it for?” Not all life insurance is created equal. There are many term and permanent options to choose from, or you could choose a combination of both.
Term insurance is often purchased to cover a temporary need and generally lets you pay lower initial premiums than permanent coverage. Permanent insurance can provide a lifetime of protection. In addition, permanent insurance can provide cash value growth opportunities and added flexibility in how you use the policy.
Figuring out how much life insurance you need is not as easy as you might think. There are generally two ways to look at insurance:
· One is a basic survivor needs calculation. It looks at things like your current liabilities, final expenses and education funding.
· Another is the “human life value” calculation. This takes into account many factors including, for example, your income multiplied by years left until retirement.
Basic survivor needs is typically the lower figure of the two. In my experience, most people typically land on a number that is between the two.
Whichever route you decide to take to address the life insurance needs of your family, one thing is clear: life insurance can be an effective and efficient way to help ensure those who are most important to you are protected in the event of a sudden or unexpected loss of life. Work with your financial advisor today and start enjoying the comfort and level of security that can come with appropriate life insurance coverage.
Together, we can work to keep you on-track towards your financial goals. Request a consultation with me to learn more.
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