How Much Life Insurance Do You Need?
This is a question that just about everyone asks themselves at some point in their lives. The answer is as simple as you want to make it. When sitting down with a client or potential client my question always is, “What do you want to see happen if you don’t wake up tomorrow?” The answer cannot be taken straight from a book or a formula because everyone is different.
Answer 1: Relieve the Burden of Debt: Many say they do not want their spouse, significant other, or family to be burdened by their debt in the case of an untimely passing. Therefore, they want to pay off all debt including mortgage, car, funeral expenses, and maybe even student loans. If this is the case, simply add up the debt and purchase a policy equal to that amount. This is typical of someone single, younger, newly married or involved, and responsible.
Answer 2: Provide Ongoing Income: In addition to the above answer, many also would like to provide a stream of income for determined number of years. For example, if the person’s income was $50k per year, they may add an additional $500k to $1 million of coverage. This would be equal to 10-20 years to replace income. The reason many do this, in addition to paying off debt, is because they want their survivors to continue their current lifestyle. The family has already been through the loss of one parent, therefore they don’t want them to lose another parent because they have to work or be stressed out to maintain their current lifestyle. This answer would be typical of parents with a young family or even a more mature family that surviving spouse does not work outside the home.
Answer 3: Leave a Financial Legacy: Another answer may be, “I want to leave a legacy for my grandchildren. Therefore, I would like to make sure there are enough funds to pay for college tuition, first down payments for a home, or to even pay estate taxes.” This is the answer with the most “guessing”. I use the word guessing because many of the factors are subject to change. College tuition continues to grow at an extreme rate. Down payments for homes are totally dependent on where they decide to live, and estate taxes is a main target the government looks at all the time. This answer typically comes from retired parents or grandparents.
So when thinking to yourself, “How much life insurance do I need?” The real question may be, “What do I want to see happen if something were to happen to me?" Life insurance is very important to the future of your loved ones. Our partners at Auto Owner's have also compiled a Life Insurance Needs Calculator to help guide you with this decision.
This article was written by:
Bryce Bilyeu
Bryce is TROXELL's Life Insurance Specialist located in the Springfield office. Bryce takes the time to get to know client’s needs and expectations when it comes to planning for the future. Together our goal is to help clients find a life insurance plan that fits their lifestyle. Bryce is a proud father of 3 and coaches youth sports in his free time. Contact Bryce at 217-321-3199 or bbilyeu@troxellins.com