Once someone starts to think about purchasing life insurance, one of the
next questions is “How much do I need?” Unfortunately there is no
blanket answer or one amount fits all. Every individual, family, and situation
is different. As I mentioned in my previous blog post, the amount of life
insurance you purchase may vary depending on your current and future income,
your time and responsibility role in the family (such as a stay at home
parent or primary earner), your debt, how many children you have, and if there are any special circumstances to consider such as a special needs child or disabled loved one.
Taking all of this into consideration, what you will read next are
generalizations and basic recommendations. It is always advised that you sit
down with a life insurance specialist to determine exactly what is right for
you and your family.

One of the basic recommendations is 10-20 times your annual salary. As an
example, if you make 100K annually, you might consider a policy worth 1-2
million dollars. Again, this may vary depending on your partner’s income,
number of dependents, debt, and net worth to name a few variables.

I’ve heard some clients say, well my spouse doesn’t need life insurance
because he/she doesn’t have any income, they stay home with our young children.
Who will care for these children if some tragedy happens to your spouse? The
cost of day care, full time caretaker, transportation, tutors, etc. can add up
quickly.  Even if you have close family to depend on, paid help will likely be needed.
The amount of life insurance this individual may need will vary depending on your
life style, and likely the age of your children and future earning ability of
your spouse.

Do you have a special needs child or disabled adult dependent? This will
change the amount of life insurance you need. If you are in this situation, you
are well aware of the added costs these loved ones add. When you are planning
your life insurance policy, you will have to add the amount it may cost to
have a full time care giver when you are no longer around. I know this may be a
scary thing to think about, but something that must be planned for.

Are you a small business owner?  There have been a few small business owners
I’ve spoken to about life insurance who did not plan on having life insurance
because “my spouse can just sell my business.” This process may take
a very long time to find the right buyer, especially if your spouse wants to
try to sell it for its proper value and not sell it at a devalued price in
times of distress.  Your business may be valuable, or, it might not be nearly as valuable as you think it is. Many small business owners use tax loopholes to reduce their
taxable income, unknowingly reducing the value of their business on paper, if they ever
decided to sell. Tangible assets may have a high value; such as real estate,
they may also take time to sell. This is time and money that those who depend
on your income may not be able to wait for and will not provide the tax benefits of Life Insurance.

Inevitably, no matter what your situation, if you are considering a new life
insurance policy, or your life situation has changed and you need to amend your current policy, the amount of life insurance you need will depend greatly on your specific circumstances. It is always best to sit with a life insurance specialist that
you trust to help you get exactly what is right for you.

If I can help you make sure your family is protected, please contact me.

One of the most common questions I hear is “who needs life insurance?”  This is a great question which I will do my best to give you my opinion.  Life Insurance is one of those things that none of us like to think about, we are basically planning for our unexpected death.  We insure our homes, cars, and other valuable items we own.  Why wouldn’t we insure ourselves to protect our loved ones from bearing an even larger burden from our unexpected death?  As a veteran Firefighter/Paramedic, I’ve seen too often how people’s lives can be cut short unexpectedly due to illness, trauma, and other factors.

Most financial experts would consider life insurance to be the cornerstone of sound financial planning.  More than likely there are people in your life who depend on your CURRENT and FUTURE income, or they may depend on your time and effort that helps support your family.

You may be a money earning member of your family that helps pay the mortgage payment, car payment, and monthly bills, buy groceries, and put money away for future expenses such as college or retirement.   You are the prime example of someone who needs life insurance.  The loss of a loved one is extremely difficult, and the financial burden on your family if your income was no longer available would magnify the situation for years to come.

You may be a stay at home spouse who takes care of the house and children, and your contribution to the family is equally important to the family especially if you still have children in the house.  Your full time working partner will struggle to do all the things you do while working full time, and may need to hire people who are able to help while they continue to financially support the family. 

A single parent may be in a similar situation. They are the bread winner, mom, dad, caretaker, etc.  You are busting your tail to do everything you can for your children. Financially preparing for your unexpected loss should not be forgotten.  You would not want to pass debt on to your children, and I imagine that you would like your children to be able to have the same experiences as if you were here providing for them. 

Do you have a pension?  Many public safety employees and employees of larger companies are working towards retiring with a pension.  Many of these pension plans have options to choose a spouse as a beneficiary which typically will reduce your monthly payment significantly.  Depending on your personal pension, you may be a candidate to “insure the difference”.  This allows you to collect your full pension, using the difference to fund a life insurance policy which will pay out upon your death providing income to your family.  What if your spouse dies prior to you though?  This is one of the advantages of this plan, you are still collecting your maximum pension for the remainder of your life and your life Insurance policy will pay out to your adult children creating generational wealth for your family.  Don’t have adult children? Cash in your life insurance policy to use for the remainder of your retirement along with your full pension.  Instead of giving your earned money back into the pension, use it to build long term wealth.

Another reason people may consider life insurance is asset protection.  Individuals with higher earning incomes may be at risk for significant tax loss at death.  Life Insurance is received tax free by the beneficiary and is a great tool to be used to protect against the loss one’s family may incur at death due to taxes.

There are many other reasons people may need life insurance, and those mentioned above are a few of the most common I’ve seen.  Each individual and family is different and meeting with an insurance specialist you can trust is important.   I would love the opportunity to help you and your family plan for the future wisely.

Look for future blog posts about “How much Life Insurance is right for me” and “Term vs Whole Life Insurance.”  If you have any specific questions you would like to see a post about please message me directly.