What’s the Right Amount of Life Insurance for You?
Filed under: Insurance
If you don’t have life insurance, you’re not alone. A recent study from InsuranceQuotes found that 40 percent of respondents didn’t have any life insurance protection. Among those without insurance, more than half said they felt life insurance was unnecessary.1
Life insurance is a valuable tool that protects your loved ones from an unfortunate and dangerous risk. While you may not expect to pass away soon, your death would likely leave your family in a difficult financial position. They can use a life insurance death benefit to cover final expenses, to pay off debt or simply to provide financial relief during a difficult time.
If you don’t have life insurance protection, or if you haven’t reviewed your coverage in a long time, now may be the time to do so. Not sure how much coverage you need? Below are a few items to consider. You may also want to meet with a financial professional to help you develop a life insurance protection strategy specifically for your needs and goals.
Estimate your coverage need.
Life insurance is meant to be used as a protection vehicle. The only way to know how much life insurance you need is to determine your risk exposure and your need for protection. Many people do this by using a multiple of their income, such as 10 times salary, to come up with a coverage amount. Others will simply purchase a policy with a round number, like $500,000, as a death benefit.
A better approach is to review your specific needs and your family’s potential expenses. Think about the financial risks they may face if you pass away. They could face bills for final expenses, medical costs and more. They also may need to replace your income if you’re the breadwinner of the family. Your loved ones could be saddled by debt that they need to pay off. Add up all these potential costs and use them as a base amount for your coverage.
Consider long-term goals.
While you certainly want to protect your family from risks and expenses, you also may want to leave a legacy that will help them enjoy a bright future. For example, you may want to leave enough money behind to pay for college for your children. Perhaps you want to help your spouse pay off the mortgage or retire early.
Life insurance is an effective tool to help you leave a lasting and impactful legacy. The death benefit is tax-free, so your beneficiaries will be able to enjoy and use every dollar left to them. Think about how you can use life insurance to improve your loved ones’ financial future.
Consider nonfinancial household contributions.
Life insurance is often important for the person who contributes the most income to the household. However, it’s also useful for those who earn little or no income. Even if you don’t work outside the home, it could still be important for you to have life insurance.
Consider what would happen if you passed away and what your spouse may need to do to replace your contributions. Would he or she have to pay for child care? Would they need to hire help for household maintenance? Think about the replacement cost of your contributions and use that to determine your need for protection.
Ready to implement your life insurance protection strategy? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
17600 – 2018/4/19