Life insurance is an important part of a client’s overall financial plan, and too often, it’s left out of the financial planning picture. Many households have no insurance at all, or, if they do, it’s an employer-provided benefit that may not be enough to adequately address their financial objectives God forbid something horrible happens.
Our tagline is this – don’t let an emotional travesty become a financial one. Get the coverage you need, pay as little as possible, and then get rid of it when you don’t need it anymore. As September is Life Insurance Awareness Month, here are 3 things to know about life insurance that might encourage you to explore things further, if you feel you might be one of the many under-insureds out there.
- What’s the right amount of coverage for me and my family? That depends. But think of it like a field goal in football. On one end, the minimum you should have would be something we call “capital needs” – enough to pay off a mortgage or other debt. This would relieve your survivors of any burdens tied to your financial obligations. On the other end would be your “human life value” which adds up all the paychecks you will accumulate between now and your retirement so that they can be replaced (typically a pretty huge number). Like kicking a field goal, anywhere in-between the two is good. The best thing you can do though is go through a process of calculating how much money or income your family needs if you die suddenly. Compare that to your current income. If your existing capital or assets couldn’t generate that income, get insurance to cover the difference.
- Isn’t life insurance expensive though? It could be. Expense is tied to four factors; your age, your health, the type of insurance you want, and the amount of the death benefit provided. The younger you acquire life insurance and the better your health, the cheaper it can be. The type refers to whether its temporary or permanent, and clearly the higher the death benefit the more it costs. Temporary insurance and group insurance through work can often be quite cheap, relatively speaking. So, don’t just assume it’s cost prohibitive without checking. Especially because the cost of not having insurance could be catastrophic.
- Needs change. We refer to it as the insurance curve of life. When you’re young with a mortgage and children and student loans, your insurance need is probably higher than it’ll ever be. As you prepare to retire as an empty nester without debt, perhaps insurance becomes more of a legacy choice than support for survivors’ needs. Reevaluating your needs annually as part of financial planning makes sense. Break down the need over time. Covering the mortgage can be covered by a cost-effective term policy. Protecting certain goals like a child’s education can too. Group benefits (if provided) can help replace several years of paychecks. And permanent insurance can provide uninterrupted coverage as those needs change. What’s right for you and your family is as unique as you are.
There’s a certainty of uncertainty to what lies ahead of us and no matter how smart we think we are, there are simply things we cannot know or predict. So, planning for the unimaginable, an untimely death, is a must in every financial plan. We’re here to help if you have questions.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. The strategies mentioned may not be suitable for all investors.
Tracking # 1-894192