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LIFE INSURANCE PRODUCTS
Things to consider about life insurance
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How much Life Insurance is right for you?
How much coverage should
you own personally, not counting group term coverage?
With so many people frequently changing jobs these days,
many are learning that owning and controlling their own
life insurance policy has many important advantages. In
addition they are often surprised to learn that they have
been significantly underinsured.
Traditionally, individuals
tend to buy life insurance in round numbers — such
as $100,000, $250,000 or $500,000 — or using the general
rule of purchasing 8-10 times their household income. Few
actually try to determine the correct amount to purchase.
While doing so is a relatively simple process, it can be
uncomfortable for some because it involves thinking about
death. Given the importance of this issue to survivors,
the best solution is to move beyond that discomfort and
plan accordingly.
Determining
What You’ll Need
Consider family needs within
the first few months of your death. Funeral expenses, administrative
costs and other immediate expenses can be shocking. In addition,
clearing up unpaid bills or revolving debt like credit cards
or consumer loans is often necessary.
Determine how much will be
required to pay off any remaining mortgage balance on your
primary residence.
Providing an education fund
for your children is also critical. There are many schools
of thought regarding this, but you must consider how much
money you would like to see allocated for your children’s
education in case of your death.
The final issue is often the
largest — income replacement. If you have taken care
of the above-mentioned needs, most studies indicate that
a typical family can maintain its standard of living on
60-75 percent of pre-death household income. While it is
a personal choice, you must consider whether the beneficiary
will live off the principal paid by the policy or the income
it generates through investments. It is also important to
consider the length of time this money will cover. Most
families decide that this should last at least until your
children are out of college.
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