We understand that a conversation about life insurance is not always an easy one, but should be part of your long-term planning. There are many good reasons to consider purchasing life insurance. Life insurance gives your loved ones the resources to pay off debt, continue living the same standard of living and provides added financial security. Also remember, the tax-free proceeds from life insurance will provide your loved ones with a tangible expression of your concern and thoughtfulness.
After you have decided to purchase life insurance, it brings us to the most significant question, that is how much life insurance do it need? That question depends on many factors.
- How much will be required to meet my family’s financial obligations?
- How much debt do you have other than your mortgage?
- What are the future income needs of my family?
Once you know this, we can provide you with limit and pricing options. Here is an example for you to consider.
After Tax Monthly Income $5,000
Savings $ 800
Under this example, it takes around $5,000 of after-tax income to sustain your family. If you are gone, we might expect your family to need that same amount of after-tax income still. You would need an investment amount of $500,000 to see an average return of 10% or $50,000 annually. We understand that investment returns change over time, but this is a reasonable approach.
We recommend term life insurance which is very cost effective. The price is based on how much coverage you need, current age, and length of time you would like the coverage. You pay as you go and can drop the policy at any time. Usually, term insurance is purchased in 5, 10, or 15-year terms, but again you don’t have to renew. It is cost effective to purchase a longer policy term, as it locks in the premium.