When our second child was born it was time for my wife and I to revisit our life insurance policies.
At the time our son was five years old, and we wanted to make sure we had enough insurance coverage to take care of them should something happen to either one of us.
Since I’m self employed and my wife has good benefits from her company, a “simple review” of our existing policies wasn’t something that could be done in 20 minutes.
That’s why we decided to sit down with an experienced insurance agent.
How much life insurance is enough?
When it comes to life insurance it’s a simple enough question to ask, for sure.
And at the risk of over-simplifying things I’ll outline a few common sense ways you can come up with a number that might work for you. Of course, it’s important to keep in mind before you come up with a “number” why you’re getting an insurance policy in the first place.
In other words, why are you getting a life insurance policy, or increasing your coverage?
For my wife she wanted to replace an older term policy which would “expire” soon (they don’t expire, but the guaranteed premium amount becomes ridiculously expensive) with a new, 20 year term.
And 20 years?
Our youngest child, Amy, just turned 5 years old. So, since the primary purpose of this policy is to replace lost income should something happen to my wife, we wanted to extend the life insurance coverage out past a time when Amy would be finished (hopefully?!) with college.
In this case, the amount of coverage was based on a multiple of my wife’s salary.
And term made this amount of insurance budget friendly.
This method is a fairly common, though crude, way of coming up with a number, and there are a number of other ways as well.
For example, another method to replace lost income is to figure out what your annual salary is, then figure out how much money deposited in an interest bearing account (or investment account) produces enough income from interest alone to replace the lost wages.
In both cases, of course, the examples are based on income replacement.
But there are other purposes for life insurance, such as estate planning.
In these cases it’s best to sit down with a certified financial planner or estate planning attorney to come up with a number that allows you to pass as much wealth on to your children (or other heirs) while paying the least amount of tax possible.
The key is to remember that everyone’s situation is different.
If I shared with you how much coverage my wife and I have it may seem like a lot to some people, and woefully inadequate for others. And we’re not just talking about personal differences, either. The amount of coverage that’s right for you should be based on what the policy is intending to cover or protect along with your current and projected future financial situation.
Does that make sense to you?
That’s why, when it comes to life insurance, it makes sense to get a quote from a local life insurance agent who is knowledgeable about your situation and why you want or need more coverage.
This way he or she can make the right recommendation for you.
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If you need an insurance agency in New York consider contacting Bruen Deldin DiDio. As independent brokers they can help you get the right insurance coverage for the right price.
You can also save time and aggravation with a free, customized, quote comparison from qualified insurance providers. It only takes a couple of minutes so why not enjoy peace of mind by getting the coverage you need.
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Either way the choice is yours…