Life Insurance

Why buy life insurance?

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In short, all insurance exists to protect you and your loved ones against financial hardships you do not have the personal investments or income to cover.  If you have debt that is not yet paid off, or your family relies on income you or your spouse earns to meet monthly bills, life insurance is a low cost way to provide lump sum money to the surviving family members.

How much life insurance should I own?

There are several ways to arrive at this answer, but a good rule of thumb is to own 8-10 times your yearly income.  A more precise approach is to total your debt (with the intent of paying it off at death), calculate the lump sum amount you wish to set aside for a fully-funded education fund for children, then determine the ongoing income needs of the household with no debt and a fully-funded education fund.  Take the income need and subtract from it any income the surviving spouse brings in.  The difference divided by .10 gives you a lump sum that would produce the monthly income needed, assuming it is invested at a 10% annual return.  Add all 3 lump sum figures together and you will have the amount needed.  Don’t worry if you are not exact, because monthly social security benefits are generally paid for each child at home too, serving as a buffer for you.  Keep in mind all life insurance purchases should be reviewed periodically, with the idea of reducing coverage as you eliminate debt, build investments, and as your children get closer to leaving home.   Your household income needs will reduce in these instances, and you will need less life insurance to protect your family.

My spouse stays at home, so should I insure her or him?

The stay-at-home spouse is the single most underpaid worker in society.  Imagine what they do in a day:  house cleaning, child care, child chauffeur (school, extracurricular activities, parties, doctors, dentist, etc.), meal preparation, laundry, and the list goes on.  The point is, the loss of a stay-at-home parent most certainly will produce financial hardship and needs to be protected against with the same goal as insuring yourself.  What would it cost to hire someone to provide the necessary replacement services while you work or what income would you forego to be home more to take care of your home and children?  Could you handle it if all your debt was paid off?

What kind of life insurance should I buy?

While there are opinions supporting and opposed to all of the life insurance products offered today (e.g. whole life, variable life, universal life, term life) there is no dispute that Level Premium Term Life Insurance provides the largest amount of insurance protection for the lowest monthly premium cost.  These policies are available with premiums guaranteed not to increase for 10, 15, 20, 25 and 30 year periods to meet your personal time frame.  No life insurance policy is the complete solution for a family’s financial objectives.  However, as you work toward establishing long term wealth and financial independence, Level Premium Term Life Insurance should be an integral part.

In summary, it is our view Level Premium Term Life Insurance is the best and most cost effective  tool in a financial plan, to insure your financial obligations while you focus on building a fully-funded emergency fund, eliminating debt and building long term wealth through high quality investment strategies.  For a free quote and to speak with one of our advisors, simply contact our office and we will gladly assist you.

 

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